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.