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Listen: Make provisions for the different stages of life

Financial advisor Scott Fraser shares his advice.

RYK VAN NIEKERK: Welcome to this Financial Advisor podcast and in this series of podcasts I speak to leading South African financial advisors and we talk about the industry, their personal investment philosophies, how they deal with their clients and their views on fees and regulations. My guest today is Scott Fraser of Enriching Life, it’s a franchise of the Liberty Group and Enriching Life is based in Kenilworth in Cape Town. Scott, welcome to the show, tell us a bit about Enriching Life.

SCOTT FRASER: Hi, Ryk, thanks for the chat. I started at Enriching Life a couple of years ago, after a certain incident with the family, and I’ve known Enriching Life since inception, which was 20 years ago back in 1996. The MD, Des Yeats, was on a hockey tour and I was playing hockey against his son and that’s where we met and annually we saw each other at hockey tournaments and it just seemed like the right fit, so when I moved down to Cape Town I got involved with Enriching Life. It’s a franchise of Liberty Life that started then and it’s just grown year on year for the last 20 years.

RYK VAN NIEKERK: But you’ve just referred to a personal event in your life that has played a part in shaping your future and you discuss this in a very interesting video on the website, and you told the story of why you became a financial advisor. Can you summarise what you say in this video.

SCOTT FRASER: My dad was a financial advisor back in the ‘90s and my whole perception of the financial industry was a little bit wrong. On September 11 2011 my dad had a stroke and it was pretty tough because we didn’t know what he had in terms of insurance, medical aid, investments, we didn’t know who to contact.

RYK VAN NIEKERK: How old was he?

SCOTT FRASER: He was 57.

RYK VAN NIEKERK: Okay, so quite young.

SCOTT FRASER: Yes, very young. So we didn’t know what to do, we had to consolidate all the investments and policies and RAs and so on, and pretty much that was real, that was the snapshot of our financial situation, not knowing how long that money would last. There was a bit of silver lining in having income protection but that gave us seven years. So that journey that I started had clear direction, that I had seven years to provide enough income for the folks before looking at the next generation with my kids.

RYK VAN NIEKERK: That video really put a face behind a very scary topic, which is financial planning. Most clients or people are not financial experts and feel intimidated by financial advice and sometimes they do not engage with a financial advisor due to that reason, is that your experience as well?

SCOTT FRASER: Yes, I do. Even chatting with my mom, she’s very reserved and doesn’t like talking about it because it is a daily topic, whereas I feel one should share it because everyone has got their baggage, everyone has got their history, everyone has got some sort of ordeal of different magnitudes, yet it still weighs down on their shoulders. So I wanted to share my story and relate it to people, a firsthand example, knowing that this is not the worst but it is my story.

RYK VAN NIEKERK: Let’s talk about the industry, around 15% of South Africans will be able to retire comfortably, which is actually a shockingly low number, what do you think is the current state of the financial advice industry, do you think it’s actually reaching the people you guys should reach?

SCOTT FRASER: I think we are all living with this stigma that it is an unknown topic and it’s very difficult to foresee markets, it’s difficult to foresee what one needs if you are a 30 year old, 30 years down the line when you are 60. The lack of education at schools and to some degree, varsity, people don’t get that education about compound interest, not knowing what the future holds.

RYK VAN NIEKERK: Let’s talk about your investment philosophy, say a prospective client sits in front of you, the person is young and is looking to start investing or saving for retirement, what would your broad advice be?

SCOTT FRASER: Broad advice, diversification. I feel that there are a lot of different investment vehicles out there, so the general advice is to try and pick as many of those vehicles as possible so that you can access your money at different stages of your life and at different times when needed.

RYK VAN NIEKERK: Do you prefer certain asset classes over others?

SCOTT FRASER: I tend to be of the view of a more balanced portfolio, so some equities, of course, but a more balanced approach. Looking across the equities, the bonds, I think everything at the moment is so out of sync globally, which affects local stuff, so you want to try and be as balanced as possible.

RYK VAN NIEKERK: We’ve been on this currency rollercoaster ever since the president fired his finance minister in December 2015. I’m sure your clients would phone you and be quite unhappy with the performance of their investments, especially in dollar terms, how do you operate in this environment?

SCOTT FRASER: Again, it’s managing expectations, as well as trying to help the emotional side of it, to say, guys, this is the plan we put in place, we’ve got to stick to our plan. If we look at a retirement annuity and your 35 or 40 years old, you’ve still got a long way to go, so ride out the storm and stick to the plan.

RYK VAN NIEKERK: How many clients actually pick up the phone and say, listen Scott, what is going on here? What is the tone of that conversation?

SCOTT FRASER: I’ve had a lot of emails, not so much calls, I think people are very nervous and intimidated, as you say, to pick up a phone and have that conversation because they don’t have the substance or the education behind it. They drop me an email saying oh my goodness, it’s out of sync, it’s not doing what it should be doing and let’s cancel it or let’s reduce it. Again, you’ve got to console them and say, guys, this is the plan, this is the action and help them understand it, just help them understand it.

RYK VAN NIEKERK: You are part of the Liberty Group, which could be a big advantage, obviously Liberty is one of the most respected financial institutions in the country but there’s also some criticism of financial advisors linked to a financial services group, what do you regard as the main benefits of being part of Liberty?

SCOTT FRASER: I think it comes down to the training. I remember my dad when he started back in the late ‘80s, he said the Liberty training is second to none. After his incident a lot of people internationally still recognise Liberty as their training. It’s what I have known and having to go into the nitty-gritty of it getting into the industry I like the reputation that Liberty does have out there, I back it.

RYK VAN NIEKERK: How important is training for a financial advisor or put differently, how much of a role should a gut feeling play when you advise people on how to invest their savings or plan for their retirement?

SCOTT FRASER: I think maybe I’ve got a different view on that to most people, being a financial advisor the whole thing is to do with people and relationships. Some people are people persons, some people can know the whole textbook backwards but they can’t pick up the phone, they can’t chat with clients. So for me I think it’s to do with relationships, I think it’s to do with people and that was my whole perception growing up that made me stay away from the industry thinking that it was number crunching but it’s not, it’s to do with the people. So I pride myself on building relationships, networking and maintaining those relationships.

RYK VAN NIEKERK: Scott, there is a new generation of investors emerging, the so-called millennials, and they would rather interact with a computer or a so-called robo-advisor than an actual human advisor. Do you think we will see changes in the way financial advice is being consumed?

SCOTT FRASER: Yes, I agree, there is a new generation coming through. I feel that I’ve got a foot in the new generation, as well as the old, with respect. One has to have a presence online, you have to be online, you have to use different social media platforms in their different capacity to extend your reach, to branch out and network to this new generation, who are happy to interact online. Then my other foot being with the guys face to face, where you can touch topics through emotion and body language, and really build that relationship face to face. Robo-advisors, yes, it’s going to be there but I think it’s an additional tool that advisors can use.

RYK VAN NIEKERK: Ja, it’s s developing industry. Let’s talk about fees, one of the criticisms of financial advisors linked to a financial institution such as Liberty is that the fees are higher and that you will recommend Liberty products and earn fees on it. How do you explain that to prospective clients?

SCOTT FRASER: Again, that was the stigma I’m talking about, long ago people used to hide all these different performance fees and commission costs and management fees. Now everything is so transparent, you’ve got to reveal it, you’ve got to show it and when you sit with a client you disclose that, you say this is an endowment product, an RA life product, [indistinct] your unit trust platform and I feel that the life houses are more expensive and have been for so long. But when you go back to the ‘90s and the commission structure was totally different then and the compliancy and the regulations were totally different, it is evolving, which I’m happy about and I look forward to RDR, which is coming up next year and I like that idea of adding a service charge, a fee-based industry, where you can now say, guys, I’m happy to provide a service for a fee, rather than try and hide a cost in a premium or policy.

RYK VAN NIEKERK: Do you think there is too much emphasis on costs? Sometimes you would speak to a prospective investor and for an hour that person would rant about the costs of a certain product and only talk for ten minutes on the potential return.

SCOTT FRASER: Yes, I do feel that there is too much emphasis on cost, sometimes you don’t know what opportunity costs but you’ve got to go and meet the guy and have the discussion, see where the discussion leads to, you don’t know how networking can lead you to the right clientele. I think again that’s where the social platforms [play a role] you’ve got to be able to provide that added value to say guys, this is what I’m worth but it’s negotiable.

RYK VAN NIEKERK: Scott, you’ve referred to RDR previously but there are a flood of new regulations, affecting financial advisors, being implemented at the moment. Do you think the whole industry is overregulated?

SCOTT FRASER: Yes, I think it’s becoming a profession, financial advisory as a profession, it’s a tough one. It is evolving quite quickly and to judge someone’s honesty and integrity you can’t put that on paper, yet you’ve what you say is what you’ve got to do. I know if you look at doctors, if they get the diagnosis wrong there is recourse. If we get the markets wrong there isn’t much recourse other than your conversation and agreement.

RYK VAN NIEKERK: Just lastly, your message for people who haven’t done proper financial planning, why is it so important and what are the key points they should focus on?

SCOTT FRASER: I’d say financial planning is really, really important because you can write your date of birth on an application form but you can’t write your date of death, it’s just the unknown. We’ve been given this ability to earn an income through our bodies and our minds and one needs to protect that ability because of the unknown. So you make provisions for that and from that foundation you can build a real secure financial plan and financial spectrum that can help you throughout the different stages of your life to avoid the problems of death, disability, taxes and those unknowns.

RYK VAN NIEKERK: Thank you, Scott. That was Scott Fraser of Enriching Life, a franchise of the Liberty Group.

 

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