RYK VAN NIEKERK: Welcome to this Financial Advisor podcast, where I speak to South Africa’s leading financial advisors. Today I speak to Eric Jordaan of the Cape Town-based Crue Invest, he’s an admitted attorney and a CFP. Eric, welcome to the Moneyweb studio. An attorney and a CFP, how did you get from an attorney to being a CFP?
ERIC JORDAAN: Thanks Ryk, for the opportunity. It was an interesting life journey for me as well, starting out in the legal profession, practicing as an attorney and then getting to a point where you realise that the benefit, and where you could best assist people, probably, I found, was in their finances and ensuring that they’ve got a financially secure future and that’s where I really got a bit more interested in financial planning. A lot of the legal aspects of what I have been trained in are so applicable to the financial planning of each individual client.
RYK VAN NIEKERK: You see many CAs becoming advisors or financial planners but not many attorneys – where is it, is it the tax planning? Probably CAs would be good, probably estate planning, but what other areas does it benefit?
ERIC JORDAAN: Correct. From my individual perspective I had quite an interest on the tax side, so I did a master’s degree in tax planning, so that’s where my initial interest in the financial side had a touchpoint. So from thereon, yes, estate planning has quite a lot of relevance there, structures like trusts, understanding how an individual can use a trust to their best interest, whether it’s advisable to use those structures. Those advice points have become really relevant in the last couple of years and you feel that’s where you can add a lot of value to your clients.
RYK VAN NIEKERK: On the Crue Invest website one of the first phrases you actually see is that you state that Crue is fiercely independent – why is this important?
ERIC JORDAAN: We see independence as being one of the important aspects of any advisory firm out there and the reason we’re so fiercely independent is that we are there to act in the best interest of our clients, so ultimately we are there for the benefit of our clients. We want to do what’s best for our individual clients and often what we have seen is that there is no one-size-fits-all solution to all clients and that’s where the fiercely independent part comes in.
RYK VAN NIEKERK: I think many of the advisors at some of the insurance groups or the advisors who are affiliated with a particular asset manager would say the same.
ERIC JORDAAN: Not that we think that those advisors can’t advise a client to the best possible ability but from our point of view it puts you in a better position to be able to really offer the client all the options out there, and every aspect of a financial product and how products are designed by various insurances, asset managers, all of them have a specific target market and an area where a specific product or structure suits a client better. We just feel like being independent allows you to tie those two up better for a client.
RYK VAN NIEKERK: Do you think clients appreciate that?
ERIC JORDAAN: I do. From our experience clients do want independence from their advisor, they do feel that their advisor is in a position to really look after their interests better in that way.
Structuring financial plans in the current economy
RYK VAN NIEKERK: We’re living in interesting times, we’ve seen a lot of political instability, we’ve seen a depressed economy for a few years now, the JSE has underperformed relative to other markets around the world, does this influence the plans you draw up for clients currently, as opposed to, say, five or 10 years ago?
ERIC JORDAAN: It definitely does. We look at – especially from our planning perspective – at being a long-term investment strategy, so that’s what we look at. And especially the depressed markets in the last four to five years have really made it difficult for clients to stick to those plans and start to question whether those return assumptions that were built in those plans are still relevant and realistic.
RYK VAN NIEKERK: I imagine those meetings are pretty uncomfortable.
ERIC JORDAAN: They are but we do a lot of investor education with our clients, in that we make sure that they do understand what they could expect from a specific solution that’s offered. So before a client is advised to invest in any specific solution they are well-versed in terms of what those possible outcomes can be, especially in the short term, and then trying to focus the client to understand that the short-term volatility in the market is really just there to sometimes provide opportunity for clients as well. But you remain focused on the long-term outcomes and ensuring that those long-term trends are still on track.
RYK VAN NIEKERK: You get different types of clients, you get those who pitch up once a year to talk to you because you set up the meeting to give them feedback and then they can or cannot be very surprised at what they see. Then you get the other type of client who try and phone you on a weekly basis, saying Naspers went down 2%, it’s the end of the world. How do you manage that?
ERIC JORDAAN: Yes, we’ve actively tried to discourage clients from keeping such a close track on the market because it typically tends to lead clients to want to make the wrong decision. When you see volatility in the short term you want to react to that and you feel that you need to make a decision, which often leads to you making the wrong decision. That’s why we at least have an annual meeting, sometimes half-yearly meetings, with our clients, depending on what the client’s needs are, to ensure that they understand where things are tracking, are things on track, is it necessary to make any changes to what’s happening in the short term. For us, more importantly, it’s to give us an opportunity to reinforce the long-term objectives and goals, and remind clients what their long-term objectives are.
Giving clients the best opportunity to reach their goals
RYK VAN NIEKERK: One of the key things I think financial advisors need to consider is asset allocation. Now, either you can do it – advising your clients, for example, to have more exposure or less exposure to something like, say, listed property – or you can delegate it to the asset manager and what is your thinking regarding asset allocation?
ERIC JORDAAN: We as financial planners see our role as first of all identifying what those clients’ long-term objectives, needs and goals are, looking at where they currently are positioned and getting an understanding of what those return requirements are that a client would need to be able to give them the best possible opportunity of reaching those goals. So once we understand what those return requirements are, we then outsource the asset allocation to a portfolio manager, who then constructs those portfolios to give the client the best possible solution and best possible chance of actually achieving those long-term return objectives, while being exposed to as little as possible risk in getting to those goals.
RYK VAN NIEKERK: That’s a pretty structured approach and I think many advisors do do that but is there any room for innovative thinking for an advisor for certain clients?
ERIC JORDAAN: Yes, each client’s position is unique, so you look at a client’s holistic portfolio, you’ll look at how they are currently invested and see if there is any overexposure to a specific asset class. A client might have too little or too much offshore exposure, too much exposure to property, for instance, and in the construction of your portfolio we can address those specific outliers that there are. We try to look at a client’s portfolio holistically, as opposed to looking at an investment in isolation.
RYK VAN NIEKERK: Thank you, Eric. Thank you for coming to the Moneyweb studio and good luck for the future.
ERIC JORDAAN: Thanks a lot and thank you for the opportunity.
RYK VAN NIEKERK: That was Eric Jordaan, he is a financial planner at the Cape Town-based group, Crue Invest.