Hang tight and don’t move assets

‘We’ve had a flat three to four years; it’s not worth it to climb out of the market now’ – Financial Advisor Sonia du Plessis, Brenthurst Wealth.

RYK VAN NIEKERK: Welcome to this Financial Advisor podcast – our weekly podcast where I speak to leading financial advisors. Our guest today is Sonia du Plessis of Brenthurst Wealth. Sonia has been in the financial advice industry for about 15 years, she specialises in financial planning and she is also an investment strategist. Sonia, welcome to the show.

The term ‘investment strategist’ is an interesting one, as you have to focus on the long term but there is so much local or short-term noise around in the local- and in the international markets, that can’t be an easy job at the moment?

SONIA DU PLESSIS: Yes, it’s a very daunting task at the moment and especially because investors for the last three to four years have had such a tough period and we’ve been telling the same story to investors over and over again: just hang tight, things will turn around. If you look at the end of last year, when Cyril Ramaphosa was elected, we had a glimpse of good hope … markets picked up a little bit and we thought things might turn around now. We had a good four to six weeks and then things started to go backwards again.

So now we are in that boat again, where we are four months into the new year and we’ve got to put investors’ fears to rest again. It’s like you said, at the end of the day the best advice is just to hang tight and not move those assets. Things have gone down so much, especially in our market, the JSE. We’ve had a flat three to four years; it’s not worth it to climb out of the market now.

RYK VAN NIEKERK: I received my three-month investment statement last night and I analysed it and, as you said, it didn’t look good. My portfolio is actually down and that includes my contributions over the last three months and I’m sure I’m not the only person contributing to an RA (retirement annuity) that’s in this position. Do you have clients phoning you angrily when they receive a statement like this and see their investment portfolio lose value?

SONIA DU PLESSIS: Yes Ryk, we have quite a few calls of exactly that, especially when clients look at their statements over the last three months.

There were two things that affected growth over the last three to four months. It was mainly the rand. Now we have the rand weakening again in the last two to three days but if you backtrack four months from now, we had a relatively strong rand. You must remember that especially if you’ve got a unit trust-based investment the stronger rand has an influence on the growth. So the main thing was that the rand had strengthened and also to a certain extent a little bit Naspers. Naspers is about 21% of the JSE, and in the first quarter of the year Naspers had about a 16% retraction in the price, where it was 16% down, so that also had an influence on portfolios and an overall influence on the market. So that’s why the values are a little bit down.

But that’s now until the end of the quarter, so until the end of March. If you look at a statement again … almost a month later, we have picked up that values are up again, especially now if you just wait a day or two, the rand that weakened will also boost the portfolios a bit.


Low markets ideal for RA contributions

RYK VAN NIEKERK: One dynamic of investing for the long term – and especially where you make monthly contributions to some sort of retirement product like a retirement annuity – is that the lower the market is, the better it is for you because if you are young then you get more units for your fixed monthly contribution. The reality is you actually want the market quite low as you make contributions and only want it at an all-time high the day before you retire.

SONIA DU PLESSIS: Yes, exactly, Ryk. So if the markets are down, like now, it’s exactly what you said, you are buying at a lower rate and we always tell investors to try and keep your debit order going: it’s a good thing that you are buying at a lower rate and don’t stop it. It’s so difficult to get that debit order started again if you are used to that extra cash flow, so it’s a good thing if you can try to keep that debit order going.

RYK VAN NIEKERK: Do you see many of your clients pausing debit orders when there are sudden market changes or more volatility?

SONIA DU PLESSIS: Yes, clients are definitely more inclined to pause debit orders or to totally stop debit orders if they don’t see actual growth on it. So it’s a very common thing to do but we then try to coach them and try to motivate the long-term benefit of keeping that debit order going and buying the units at a lower rate. Also to stay in that habit of saving, like I mentioned before, it’s so difficult to get into that if you have stopped your monthly debit orders to try and get into it again; it can be quite tricky.

RYK VAN NIEKERK: But, Sonia, that places a big education responsibility on your shoulders: you need to provide the guidance and provide advice to your clients not to pause their investments in such trying times, but your role is to provide financial advice and investment advice. How much of your time do you actually spend with the education hat on, as opposed to having your investment hat on?

SONIA DU PLESSIS: We spend at least about 50% of our time coaching clients and motivating them to stay invested, so it is a big part of what I do and a big part of what I spend my time on. Investments are very close to everyone’s hearts and it’s got a big influence on your wellbeing at the end of the day, so it is a big portion of what I do – motivating clients to do the right thing.


Brenthurst’s currency position

RYK VAN NIEKERK: Brenthurst Wealth has a view that investment internationally must be a big part of your portfolio, especially to mitigate the potential devaluation of the rand .We’ve seen the rand strengthened after Cyril Ramaphosa was elected president; the rand has now weakened slightly. What is your position on the currency currently?

SONIA DU PLESSIS: Ryk, it’s very difficult to have a definite position on the currency. We are more of the view that it’s very important to have a sizeable allocation to offshore assets if the risk profile allows that. We mentioned before that not everyone can stomach the volatility of offshore markets and also the volatility of the currency.

So if the client’s risk profile allows for that offshore allocation then it’s very important to have that portion in your portfolio.

I think we have also discussed this before but offshore markets just have so much more possibility and give investors a broader range of possibilities to invest in. So that to us is very important to have that allocation. It depends on your age, but roughly between 15% and 25% allocation is a good ballpark figure.

RYK VAN NIEKERK: Just lastly, you have been in the business for a long time; is it easier or more difficult to provide investment advice in the current market than, say, 15 years ago?

SONIA DU PLESSIS: Definitely more difficult. I think with social media and investors overall being much more involved – which is not necessarily a bad thing – but much more active and involved in their investments, it does influence our job at the end of the day. As I mentioned, with social media and with people being more up to date with what’s happening in offshore markets and local markets it does place a big burden on them emotionally as well and that overflows to their investment decisions at the end of the day. So trying to manage emotion and separate your emotions and proper investment decisions is quite a daunting task.

RYK VAN NIEKERK: And a very important one because the more successful you are in managing the money, the more comfortably your client can retire. Thank you, Sonia. That was Sonia du Plessis of Brenthurst Wealth.


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Sonia: “It depends on your age but roughly between 15% and 25% allocation is a good ballpark figure”

This doesnt seem to coincide with Magnus Heysteks opinion of offshore allocation on the 23 October 2017 and in addition he mentions why even put more money in a Retirement Annuity.

Magnus”My advice, for a very long time, has been for investors (older than 55) to remove their retirement funds from the stranglehold of Regulation 28 as soon as it is legally possible.

Investors over the age of 55 with money in a wide range of retirement investments, such as retirement annuities, pension and provident preservation funds have the option of moving their retirement capital away from the clutches of Regulation 28. This can be done by making permissible withdrawals, tax free and/or taxed, and moving the balance into a living annuity.

Certain funds also allow a full withdrawal (provident preservation) but such a move is subject to taxation. It would need careful consideration as the impact of taxation is onerous.

By moving money out of the fund in question, either into cash or into a living annuity, you move away from the restrictions imposed on your money by Regulation 28. Money in your hands can be moved directly offshore while a living annuity can have 100% offshore exposure, in the best asset classes and best investment themes in the world.

I have done this with my own money and have seen the difference in returns.

So, pardon me when I react with a heavy dose of cynicism whenever I hear someone from the investment industry or even worse — government —exhorting people to save more for their retirement. Invest more into the weakest-performing investment market in the world right now? No thank you”.

“We’ve had a flat three to four years; it’s not worth it to climb out of the market now”.

Almost exactly what my FA said with regards to slow (between 1 and 2.5%) growth on my RA. He called it “the market moving sideways”. YET, when I take a look at Old Mutual they show signs of 22% growth in profits… sure doesn’t seem to move sideways for them now does it? Only for the poor simps believing this let’s stay classy and call it faeces.

I’m not an FA, but in my opinion, it looks to be more worth it to buy shares in these kinds of companies than getting advice from them and getting taken for a ride, all the while they profiting. They happily take their cut if the market is performing or not, you the client, just get a shoulder shrug and some vague excuses.


Ref. Old mutual as one stock you want to invest in because it has done well? So whould you do the same 4 years ago before their merger and they were down by double digits? Who do you choose, Sanlam who did well for 2 years but shares fell by 8% just the other day?

So let’s take all our money abroad and the rand recovers and wipe out half your portfolio? Rand should be at R10 to dollar at least and we forget it was at R6…
Fund managers with teams of up to 20 people work every day to research and make money every year without imotions and the public think they can do a better job. Maybe for a flip of a coin luck but more than 95% in the long run will be worse off.

I have no problem paying someone to do a proper job, with emphasis on proper. What I have found/read so far is that in the financial sector people are getting paid regardless of what happens, and exorbitantly so. Just the other day there was an article about the excessive profit margins in the financial sector.

If for instance you revamp your kitchen, but the contractor really messes up, what happens? You request he redo the work properly. Why not so for the FA’s. These people are in charge of your money, making sure that when you retire you’re financially secure. There won’t be time for a “redo” when you hit 65/70 and find out your RA didn’t perform as planned/promised/projected. Your FA is just going to go, “market been going sidewyas buddy, nothing I could do…”

Personal note: Checking the results of how my RA performed over the last 4 years. I did some research and found that simply putting the same amount away every month into a “32 Day Notice Account” at any local bank, would have resulted in better returns. If a (financially) ‘uneducated’ person like myself can make such easy calculations, why can’t the fund manager do the same? What is he/she doing to “earn” their salary? They are supposed to be the experts, with teams of people doing this daily, for 8 hours a day.

This is a rant I know. And I am angrier at myself for signing on a dotted line with grand promises, before doing proper research. Personaly If I could do it over, I’d do it myself. Since then I’d only have myself to blame for things going sideways/south. But luckily then there would have been no admin/managing fees to pay each and every month.

US federal reserve, quantitative easing was the reason behind R6.00/$ and not so much to a strong SA economy


Your 32day account does not allow a tax benefit of up to 45%.

If however you used an RA and simply move funds to more stable income funds in the correct provider you would have earned about 7% after fund fees plus your tax benefit.

I say again, more than 95% people will not be better off planning on their own and when they loose money they don’t point fingers at themselves. Most of the time the 95% think they are the 5% who is smarter.

Investing is giving money to someone who trade with the trust they will make a profit. Who you should give the money to trade and share the profits with you is the important question.Many give it to themselves and loose it all(owner businesses) and many spread it out to a pre selected amount of large companies.
Nobody works for free including you, the people trading nor the people researching the traders.

Choose an index and you will still pay the trader(companies) and tax and the IT company.

…but hey first show me where I can put my money for large trading growth with no fees and I’ll probably walk the other way out of the casino.

That’s exactly my problem, I have earned about 2.84% growth (2.88% effective rate) since my last calculation (3 days ago), I’d be fine if after all deductions it would have been 7%, hell even 5% maybe, but this is not the case.

Moonie, your comment 95% of DIY investors failing is somewhat of an cheesy exaggeration taken from the franchise industry

To imply that an FA or fund managers are the oracle to retirement success is a bygone

Yes, one has to investigate, learn the avenues of wise investing to understand the pitfalls and successes of the investor market but its not rocket science and many platforms in todays world such as index investing can save years of “return” growth to someone blindly handing over 2.5%+ of investment to a self proclaimed sage

“We’ve had a flat three to four years; it’s not worth it to climb out of the market now”.

So sitting with your Financial Advisor, all of us can testify to the following statement

After Year 1 (2015) – Its not worth it to climb out of the market now
After Year 2 (2016) – Its not worth it to climb out of the market now
After Year 3 (2017) – Its not worth it to climb out of the market now
After Year 4 (2018) – Its not worth it to climb out of the market now

So when is it time? Oh wait, you will say 3 things
1 – I cannot predict the market > So why then make this remark in the first place
2 – Past performance is not an indication of future returns > So why make this remark in the first place
3 – Investment is for the long term > So what is long term, if we sit in another 4 years from now of sideways movement, is it then long term?

So why not just put your money in the market – yes you get sideways when it goes sideways, but at least you didn’t pay extortionately for that.

But if money in notice deposit outperforms the industry (not the market, the industry) over 4 years, I have significant doubt in the industry’s collective abilities.

Buying now is buying cheaper. Buy direct unit trusts or stocks with funds that have exposure to water resources, food produce, weapon manufacturers, medical and survival preps and artificial intelligence.

Stay way from bank deposits as the future is heading for a cashless society. Due to this banks will no longer be in a position to make huge profits like they do right now plus they have already started utilising the services of some form or other of Artificial Intelligence thereby reducing there staff numbers.

Water and food will become scarcer and weapons will become more of a requirements for nations across the world. AI is the future.

Most Investment and Life Companies will merge and have to become more innovative with their products. They are going to have to put their heads together to come up with a product more suitable for the future. Because of social media, the public are becoming more and more self educated and confident as to what they require in respect of what their investment and cover needs are.

Not long and retirement funding will be a thing of the past as the world and technology is moving at such a fast pace. A time will come worldwide where everyone will have to rely more on government for their needs. Here I am referring to those who have a 25 year period or more ahead of them before they are supposed to retire.

Lots of comments about returns, or lack thereof. It helps to think of investment returns as being uncertain in future with a certain volatility. The ALSI TRI average annual return is about 18% (from 1986 to present), however the standard deviation of the returns is 21.8%. Assuming the future is similar to the past, we can expect a wide range of outcomes (at a 95% confidence level the range of annual returns is -25 to 61%) and what we are experiencing right now is nothing unusual.
I suspect the long term average of 18% is not realistic in future as inflation has decreased.

Have been following your comments for some time and it makes sense. Good advice Sonia, thank you.

End of comments.





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