SANDTON – The South African public is hungry for financial knowledge. Observing them lapping up the words of asset managers, stockbrokers and property experts at The Money Expo over the weekend made this manifest.
What was equally obvious is that the gap between those who have the knowledge and those who don’t is practically an abyss. And this gaping hole leaves the public wide open to abuse by unscrupulous financial advisors, Ponzi-schemers and simply poor investment decisions.
One need only look at the countless “investment opportunities” springing up all over the internet to realise that financial criminals have cottoned on to this fact.
For instance, Chris Walker, the mastermind behind Defencex, amassed some R800 million in less than a year from roughly 60 000 South Africans. The process to repay these investors started in March, some two years after the South African Reserve Bank (Sarb) froze the scheme’s bank accounts.
At the time its accounts were frozen, Defencex could account for just R352 million of the R800 million collected: investors, many of whom are low-income earners and used savings and even personal loans to invest significant amounts in the scheme, are not expected to get all their money back.
That they are excluded from the means of wealth creation is something of which these investors, and others who have invested in Defencex-like schemes, are painfully aware. In fact, it drives them to believe that interference from the Sarb and other regulators is what caused the downfall of the scheme in the first place, which was performing as expected (high returns, low risk) until the regulators got involved.
Similarly aware of the exclusion felt by the have-nots, the Ponzi-schemers play on this sentiment by marketing themselves as being out to uplift the workers, the marginalised and the poor.
It is a sad state of affairs indeed that those with ill intentions have capitalised on the hunger for financial knowledge and upliftment in South Africa, while established financial services firms, with all the knowledge and tools in the world, appear to be doing comparatively little to include the masses if we measure them on affordability, access and simplicity.
South Africans want to know how to invest, how to save, how to spend wisely and how to grow their wealth.
Many probably don’t understand what value investing is or what the difference is between an active and passive investment and how to compare the fees on each. Many have probably never heard of an exchange-traded fund (ETF), an index tracker or a “diversified investment portfolio”. Life-stage investing, equities and bonds may be meaningless terms to many South Africans.
And most don’t know that promised returns of 30% a month, or 2%-a-day, should set alarm bells ringing.
They need to be taught. They want to be taught. And asset managers, stockbrokers, financial advisors and journalists should be doing more to teach and include them.