RYK VAN NIEKERK: Welcome to this Financial Advisor podcast, our weekly podcast where I speak to leading financial advisors. My guest today is Kyle O’Haher: he is the founder of the Port Elizabeth-based group, Comprehensive Wealth. He’s a totally independent financial advisor and the firm focuses especially on wealth planning. He’s a certified financial planner and has been an advisor for over 20 years.
Kyle, welcome to the show. I see on your profile on Moneyweb that you are a keen athlete and you have completed the Ironman and Cape Epic events multiple times. Now I know that is definitely not an easy feat, but you also believe that this discipline required to train and participate in these events stands you in good stead to act as a financial coach. How so?
KYLE O’HAHER: These events take a lot of time and discipline. I have been an active sportsman, particularly through my school years and varsity years, and I’ve tried to transition that into my business where we implement disciplined approaches in dealing with clients, selecting funds and advising clients on an ongoing basis. So I think to be successful you’ve got to be disciplined and I think you’ve got to repeat that consistently over time. In addition to that, from a sporting perspective, you want to improve over time and I think those strengths you can bring into your business and help clients to achieve their financial objectives.
RYK VAN NIEKERK: You are based in Port Elizabeth (PE) – are most of your clients in PE?
KYLE O’HAHER: Predominantly in PE and surrounding areas; obviously we’ve got very successful farmers in the local community just outside PE, so we do quite a bit of work down there. We also travel down the Garden Route and then we have clients in other geographies including Cape Town, Johannesburg and so on.
RYK VAN NIEKERK: Do you think it’s important to have clients in close proximity, or rather that a client engages a prospective financial advisor close to them? Does it make a difference?
KYLE O’HAHER: I think what’s happening globally is obviously there’s a big move towards technology and I believe very firmly in one-on-one contact with clients because that’s the true measure of a relationship with a client: how you interact with a client and you really get to understand and feel their emotions and what they’re thinking through those interactions.
So I don’t say that you can’t deal with clients far away or at a distance, but I think you can have face-to-face contact, which is very critical, particularly at the initial stages of the client interaction, and then support that with technology. But the personal touch is imperative and I think clients will be looking for that and they want to feel that someone cares for them.
Fixed-income investment product
RYK VAN NIEKERK: You have a very interesting website; I spent a few minutes on it. You offer a fixed-income investment product, not many advisors offer such an investment product. How does this offering work?
KYLE O’HAHER: Basically I thought of the domain in the early ‘90s and never did anything about it and then about three or four years ago we developed the site. Really the main purpose behind that was to set up an independent platform where we can offer money market rates and cash rates to clients, so they can come in and view those rates and we can help them to make an informed decision as to what financial instrument they want to use for fixed-interest purposes. So that is the initial thinking about it.
Obviously cash is not the ideal investment for clients on a long-term basis because there’s an inflationary risk, but it does serve a purpose and particularly for businesses that have retained income or surplus cash flow, operating capital that they need to put away to maximise the return with a high degree of liquidity.
So it makes sense for those sorts of entities and obviously for private clients as well who are looking to enhance the yield on cash. I think the importance of the website is that it’s independent; a user can come in and view the rates and make an informed decision. If you go to your bank, as an example, all they do is offer their rates and they very seldom will say [Bank A] is paying X but you can get a better rate at [Bank B]. So I think it does provide a good source of information for the fixed interest-bearing investor.
RYK VAN NIEKERK: The domain you refer to is www.moneymarket.co.za and I’m looking at the yields: on a call account you offer 7.35%, on a fixed deposit 8.8%, which is pretty decent and money-market funds slightly under 8%. How does it work? Do I invest via this website or do you on my behalf invest it in, say an Absa account, which offers the superior rate?
KYLE O’HAHER: ….So really it’s a medium where they can make that inquiry, they can elect to execute online or not. Obviously with the regulatory environment that we’re in we need client signatures, we need to Fica that client and then on board a client accordingly. We can do that in the call account space, the fixed deposit space, as well as the money market space. So really it’s an intermediary service, we facilitate that transaction and we place the underlying assets with the service provider, be it a bank or Allan Gray or an Absa money market fund….
RYK VAN NIEKERK: It’s a very interesting offering; is it very popular?
KYLE O’HAHER: I think it’s gaining traction. We’ve had to reengineer the site, which took place about three months ago. Most of your online viewership or at least 50%, 60% is coming through the mobile environment. We weren’t viewable on a mobile device but we’ve rejigged it a little bit and we’ve also added autonomy, where the client can apply online from start to finish and actually execute the transaction electronically. Then obviously that comes into our back office and it’s supported with contact to the client and signatures and so on.
So I think it’s gaining a bit of traction. We still need to work on it from a marketing perspective and, if anything, the key driver for us is to provide information for consumers to make an informed decision. They can elect to deal with us and we can facilitate that transaction or they can go directly to those institutions concerned, but I think it’s a useful tool.
Are certain asset managers better than others?
RYK VAN NIEKERK: Kyle, you are totally independent, which allows you to invest with any fund manager. Are there certain asset managers you believe are better than others?
KYLE O’HAHER: … I think there are some exceptional asset managers in the South African market that have, according to their mandates, delivered superior returns relative to their benchmarks. I think to a lesser extent on a global basis. Probably that has something to do with the size of our market and obviously these managers’ experience in the market, but we are very careful who we allocate capital to. Fortunately being in the industry for 23 years, we’ve spent a lot of time with various asset managers in the South African market and developed a really good understanding for their investment philosophy and their process.
I think when dealing with clients’ hard-earned savings, it’s important that we make the right allocation of capital to various asset managers so that they can deliver on – and have the confidence to – deliver on their mandate.
So I think for us being independent and privately owned, we have a preference towards managers that are generally privately owned or have quite a big equity stake in their business.
So if they have their skin in the game, then generally it’s in their best interests to do the right thing for clients and, if they do that consistently over time, they are likely to have a good outcome for clients and we monitor that quite closely.
RYK VAN NIEKERK: If you say some managers need to have skin in the game, does that exclude big firms like Allan Gray, Coronation? Offhand I can’t really think of their ownership structure?
KYLE O’HAHER: I think Allan Gray specifically are one of the largest independently-owned managers in the Southern Hemisphere. I think from a Coronation perspective, management have got a significant stake in that business. So I know in those two that there’s alignment and there’s definitely ownership, therefore, people take better care of their money. If they’ve got skin in the game then they pay more attention to that.
RYK VAN NIEKERK: That’s an interesting perspective. Many of the boutique asset managers also operate on that scale where individuals own the whole business. I’m thinking of TenX, Sygnia, Peter Armitage’s business Anchor Capital. Do you actually look at those and allocate funds there?
KYLE O’HAHER: They are obviously on our radar screen…. I think an important part of the game for us is we prefer managers with a long track record. So something like Anchor Capital (that’s been around for two or three years now) is on our radar screen; we are well aware of them but they haven’t been around long enough for our liking. So generally we’d look at managers with at least a ten-year track record – they’ve been through various business cycles. Although Armitage has been in the industry for many years I think we need a longer time horizon for him before we consider him as a long-term manager within our clients’ portfolios at this point.
RYK VAN NIEKERK: What is your position on asset allocation? Do you get involved there or do you leave that for the asset managers?
KYLE O’HAHER: No, we outsource that to asset managers – they have the resources and the capabilities to make better decisions than us as advisors….
Offshore investing strategy
RYK VAN NIEKERK: What is your position: do you prefer to send as much money offshore as you can, as many other financial advisors do?
KYLE O’HAHER: … for my personal PA portfolio, obviously my preferred asset class is global equity, but you need to look at it through the lens of a client and in some cases it’s appropriate and in other cases less so. But certainly diversifying globally is definitely considered for every client, it just depends on their capital available and their liabilities in South Africa and whether they can meet that with the assets they have here and free up sufficient room to move the assets offshore. But I do think it should form part of every client’s portfolio where it’s appropriate.
RYK VAN NIEKERK: Can you briefly explain your fee structure?
KYLE O’HAHER: Generally we charge fees as a percentage of assets. I think that’s quite a common fee model. There are other fee models and I think that’s something as advisors that we need to continue to review whether it’s appropriate or not. But currently we charge a percentage of fees under advice and I think that serves the interest of the client really well because then the client and the advisor’s interest are all aligned. In addition to that I think it’s the most sustainable business model, because it leads to best advice and I think good outcomes for the client.
Due to scale, as a result of that model, advisors aren’t put into a position where they have to sell products to pay school fees or salaries, or selling a product and pushing a product for the sake of it.
So I think that model enables advisors to put their clients’ best interests first, act with due care and diligence in advising clients and it encourages us to retain our clients, give them personal service and educate them.
I think education is a big thing and we spend a lot of time on that with our clients.
So all in all I think that model as I see it at the moment leads to better client outcomes and it also encourages clients to contact their advisor on any financial matter without hesitation, because they don’t feel that they are going to be invoiced for this or billed for that, but they can just pick up the phone and share their views or ask some financial questions and they can get an immediate response from the decision maker. So that’s my take on it at the moment but I think there’s room for change and we’ve got to continue to look at the various options.
RYK VAN NIEKERK: Thank you, Kyle. That was Kyle O’Haher, he is the founder of the PE-based group, Comprehensive Wealth.