ELEANOR BECKER: Welcome to this Financial Advisor podcast, our weekly podcast where I speak to leading financial advisors. My guest today is Elke Brink, a wealth advisor at PSG Route 21. Welcome, Elke.
ELKE BRINK: Thank you for having me.
ELEANOR BECKER: Elke is currently the youngest person in South Africa to have obtained the CFP qualification, which she did in 2016. How old were you when you qualified, Elke, and why did you choose this career?
ELKE BRINK: I was 23 years old at the time. I have always loved numbers, I just wasn’t 100% sure which industry it would [lead me to]. I grew up in a family where both my parents and my brother are doing this as well, so I think that helped. I guess there is maybe something in my blood. I studied investment management at the University of Stellenbosch and I was fortunate enough to have a few incredible lecturers, who themselves had many years of experience in the industry. So as soon as I started to understand what it was about, I was definitely hooked. I think this industry offers the perfect balance between numbers and having the opportunity to help people every day, which is extremely rewarding.
ELEANOR BECKER: How does PSG Route 21 differ from the parent group, PSG?
ELKE BRINK: I think in terms of culture we are very much the same as the PSG Konsult parent company. They provide us with tools and the best possible support teams to provide the best advice we can to the clients. I think if I had to elaborate on Route 21, as I mentioned, my whole family worked there, and this is definitely a culture we have implemented from day one. There’s just a warmth when you walk into the office. Most of our team members have been with us from day one and I think that’s definitely the culture you would feel when you get there – an extremely loyal family-orientated company.
Social responsibility towards employees
ELEANOR BECKER: Would you say that in general companies are moving away from offering employee benefits like provident funds and medical aid contributions, or is the opposite true?
ELKE BRINK: I would say the opposite. I think our experience with many of the larger employers in South Africa is that they are more and more focused on their social responsibility towards their employees and some of the benefits are actually becoming more comprehensive. I believe the challenges and demands with default regulations that have been implemented provides us with an opportunity to add value to the advice that we provide, not only to the companies but to the individuals as well and I think employers are becoming more aware of this. The focus is definitely on educating and supporting employees from an early stage, I would say.
ELEANOR BECKER: That’s good to know because I do find that often people have left their retirement saving for too late, because they don’t have this option at work.
ELKE BRINK: Yes, that definitely makes a significant difference and I think employees are very fortunate if they do have the structure at work and having the opportunity from early on.
Retrenchment on the rise
ELEANOR BECKER: In your dealings with your clients what are you finding is worrying them? What’s keeping them up at night?
ELKE BRINK: I think it’s been a challenging few years and I think everyone’s patience is just running out for things to turn around and I think people are losing some hope. I think the last week or two has definitely woken up some sleeping dogs. I think people are experiencing a lot of noise at this stage and feeling a bit overwhelmed with a lot of negative news: from the weakening rand to volatile markets and the thought of a possible downgrade in South Africa. I would also say job uncertainty at this stage. I have dealt with many retrenchments in the last year and I think this is definitely a point of concern at this stage.
ELEANOR BECKER: Is there any way for people to protect themselves against retrenchment?
ELKE BRINK: I’d say there are two different ways you can address this. One point of view is ensuring that you are financially planning for this, should something like this ever cross your path: either [via] something like retrenchment protection or just ensuring that you have an emergency fund built up for a few months to ensure that you will be okay…. Together with that I also believe that it’s a personal responsibility to ensure that you upskill yourself and make sure you are one of the best possible candidates in whatever industry you are in, to ensure that you at least minimise the risk of this ever happening to you.
Most women play no role in financial planning
ELEANOR BECKER: As this is women’s month, what would you say are some of the biggest financial mistakes women tend to make and how should we avoid them?
ELKE BRINK: I feel that many women take a step back and rely on their partners to handle the financial planning in their homes. In most of the cases that I work with, women are not even sure what provision their partner has in place and they play no role in the family financial planning or their own planning. It really does become a big problem when we deal with challenges like divorce, illness or a partner passing away. So I believe that women do need to take care of themselves as well, their own planning. I believe that financial independence is extremely important. But also just speaking about these things in any household. Not only do women live longer than men and they will end up managing all the finances, but it has also been researched that women are, in fact, better investors than men, making more calculated decisions in the long term. So I think it’s invaluable for a family to just discuss these financial decisions together.
ELEANOR BECKER: I would imagine pre-marriage financial counseling is very important in this regard?
ELKE BRINK: Yes, definitely and I think just being on the same page and ensuring that everyone knows what provision is in place. It’s not always possible for one partner to make sufficient provision for both of them when it comes to retirement, so I think just ensure that you speak about these things.
ELEANOR BECKER: Is there a gender gap, so to speak, in terms of financial planning and retirement savings?
ELKE BRINK: Yes, I would say so. I’m not always a fan of referring to the ‘gender gap’ – it’s spoken about worldwide at this stage. But I do believe in most industries unfortunately women are earning less than men. Their time in the workforce is also shorter due to breaks in employment, should it be maternity leave or more time raising a family. And, as I mentioned earlier, women live longer than men. So now we need to take all of these components into account and still make sufficient provision for retirement, so I think that’s definitely a challenge to deal with. I think women are also more risk averse: sometimes it takes them a little bit longer to implement products to save for the future.
ELEANOR BECKER: So what advice would you have for [us] in terms of saving enough for retirement if we are so risk averse, how do we tackle that?
ELKE BRINK: I think what’s important and in personally dealing with a lot of women, I think women need to understand that the financial calculations are not always going to look the same for a woman’s life, as opposed to a man’s life, and just embracing that. I think we need to make sure that we do our own financial planning and put our own planning in place for the future, while taking all of these components into account. So I would just advise to make it a focus point to at least talk to an advisor early on in your career and start to plan for all of these things, planning for maternity leave and planning for the breaks in employment and whatever income you do earn to take that into account and plan for that as well. I think it’s just a focus point that should change a bit in the lives of women to ensure that they are really taking care of themselves, if I can call it that.
ELEANOR BECKER: It’s not something that we tend to do. We tend to put everyone else first before ourselves.
ELKE BRINK: Exactly, I think it’s one of the best qualities that women have but they do tend to put themselves last.
Encouraging young people to save
ELEANOR BECKER: How do you try to convince your younger clients that it’s necessary to start saving as much as possible, as soon as possible, for something so far ahead in the future?
ELKE BRINK: This is definitely a very challenging mindset for younger people. I think affordability also remains a challenge for younger people, as they are just starting out their career and building a family. I try to explain the benefit of compound interest and how this will take a lot of pressure off in the long run. With younger people I think the shorter-term planning is very important as well, from family planning to a house and a car. By planning for these things early on we can also avoid a lot of debt, which can improve the bigger picture with time.
I think also understanding the long-term benefit of tax benefits in your portfolio and just the benefit of diversifying your portfolio from day one. Just having time on your side then makes financial planning very easy and it takes a lot of pressure off [you] later in life.
So few of the population actually benefit from this, but if you just start diversifying early on you are good to go.
One of my favourite quotes and I have quoted this before in one of my articles, is by Charlie Munger and he says: ‘The big money is not in the buying or the selling but just in the waiting.’
ELEANOR BECKER: Patience is definitely not a virtue for most of us.
ELKE BRINK: Yes, myself included [laughing].
ELEANOR BECKER: You recently wrote an article for Moneyweb on millennials and whether or not they are making the same mistakes, in terms of finances, as generations before them. What are some of the trends of our generation in terms of how we do or don’t save and invest for our future?
ELKE BRINK: I’d say the mindset of instant gratification. I feel that this is just a global state of mind at this stage and not necessarily only millennials. I think everyone is just surviving day-to-day and not really thinking about the future and, therefore, not really saving or planning, just thinking that we will deal with this later in life. I think many younger people also have the mindset that they are indestructible, which in principle I really like. But they do need to understand that illness and disability happens to younger people as well and we do need to plan for these things.
ELEANOR BECKER: I have also heard that millennials tend to be risk averse in terms of our investments, because we have watched generations before us make mistakes, for example, those around the global financial crisis. Have you found this at all?
ELKE BRINK: I think maybe it’s a combination of being risk averse and I think we are living in a century or a generation where we are being bombarded with a lot of information. So I think that does make it challenging with new asset classes, if you can call it that, coming into play, things like bitcoin and cryptocurrency and so on. I think younger people are unsure in terms of what they should be doing and I think it doesn’t really help that we are seeing a lot of what has happened since 2008 again at this stage. I think people are definitely more risk averse and I think that they are exploring more options in terms of what they should be doing and approaching their finances in a [very] different way.
Stop hoping for a miracle at retirement
ELEANOR BECKER: Lastly, what would you say is the best and the worst financial advice that you ever received?
ELKE BRINK: I would say the best is to start as soon as possible. I started with my first income from my house committee salary when I was still studying, and I think this has definitely made a big mindset difference over the last few years. Then as soon as you have the opportunity to start making use of your annual tax benefit with retirement products to use it, as it does make a significant difference.
I would say the worst is to rely on anyone else to ensure that you have provisioned for your future, should it be a partner or family members. Life does not always work out that way.
I think it is our own responsibility to ensure you are saving for your own retirement and just doing your everyday planning. I think there are many excellent advisors and specialists out there available to assist people with their planning and we need to stop putting our heads in the sand and hoping for a miracle at retirement.
ELEANOR BECKER: Just from your example it really does show the value of getting proper financial education from a young age. I can’t believe you started investing so early.
ELKE BRINK: I think it does make a difference growing up in a family who does this, but I do believe that the information is available to anyone at this stage. I think with platforms like Moneyweb and things like that, the information is available to anyone out there and I think people should just start making this a focus point, as nothing else is really possible in this world if you are not planning your wealth.
ELEANOR BECKER: That was Elke Brink, a wealth advisor at PSG Route 21.