– By Sunel Veldtman
Foundation celebrated our fifth anniversary last month. It feels like just the other day when I walked into our office with my laptop and a bag full of hope.
Foundation Family Wealth has been a dream unfolding for me. In the years leading to my departure from corporate life, I started seeing that there could be a better way for financial advice. Life was changing and financial guidance needed to merge with life advice.
We are starting to get a glimpse of the reality of that vision. We are helping many clients navigate varying life changes. Our position as independent, holistic financial planners positions us to support our clients in much deeper ways.
“Advice is a form of nostalgia, dispensing it is a way of fishing the past from the disposal, wiping it off, painting over the ugly parts and recycling it for more than it’s worth.”
This quote has been attributed to many, including Shakespeare.
Advice can no longer be about what has worked in the past will work in the future. The art of financial planning is about distinguishing what will change and being poised for that change. We think carefully about the risks that our clients will face in the future.
In the five years of running Foundation, the future has arrived at an unexpected pace. Changes in technology and life expectancy are driving the fluctuations in our industry. Locally, changes in regulation, tax and the political landscape require a careful thinking approach to financial planning.
Although we believe that we apply our life-wisdom to every situation, we can never profess to ‘know it all’. In many instances, our clients are older, wiser and more knowledgeable than we are. It is why we believe that financial planning is a better name for what we do. We plan with our clients. We bring our expertise, systems and models and we use our collective wisdom to achieve the best outcomes for you. In the end, it is your wealth and your life. Our role is to help you make informed decisions.
People often ask us what we do to earn recurring fees. This year, we earned those fees!
One of our most important jobs is to help our clients stick to their financial plans. Dalbar’s annual Quantitative Analysis Of Investor Behavior study in the USA shows year after year how poorly investors perform relative to market benchmarks. Over twenty years, the survey shows that investors earn only half the available market return.
One of the reasons for this, is investors’ erratic behaviour, also called the behaviour gap – they chop and change their strategies, resulting in buying high and selling low.
In the past year, local cash outperformed most asset classes. There was the temptation to move funds out of riskier assets to cash. It is our role to keep our clients focussed on their (mostly) longer-term goals. We are pleased that we have managed to prevent most of our clients falling into these wealth-destroying traps – buying foreign currency at R18/ USD or selling equity investments at their worst last year.
Furthermore, the many changes in tax legislation in the past year has prompted us to relook at tax-planning avenues (there are not many left!). It requires in-depth product knowledge more than ever. Estate planning has also come back in focus and necessitates significantly more time planning with our clients. We are now including more detailed estate duty and fee calculations in our financial plans and review meetings. Our detailed knowledge of our clients’ affairs put us in an ideal position to liaise with accountants, tax specialists and legal specialists to help our clients with their estate planning.
We have worked continuously with product providers to ensure that the products we deliver to our clients are cost and tax effective and able to deliver the returns required to meet our clients’ goals.
As an example, we have engaged with product providers to be able to offer a choice of passive or active solutions in the future. Our research is not conclusive – passive is not what it is made out to be, especially not in South Africa. However, we want to be in a position to offer these choices to our clients. We are not married to any particular philosphy, product or investment strategy. More on this in our next newsletter.
Our decisions, in line with global trends, to outsource asset management, has proven to be the right call. Increasingly, financial planners globally are following suit. It gives us time to spend with our clients, to research individual solutions for our clients and to build a sustainable business.
Our business has shown remarkable growth in a stagnant economic environment. There has been little growth from financial markets over the past three years. Nevertheless, Foundation’s client base is growing through the positive experiences of our long-standing clients and a network of enthusiastic supporters. Thank you!
Personally, I celebrated a continuous advisory relationship of 20 years with one of my very first private clients in the past year. I find great satisfaction in these long-standing relationships. In many cases, my clients have become my friends and I have learned from them in their areas of expertise.
Elke and I celebrated 10 years as working partners this year. Elke started working with me as a fresh graduate with limited experience in the industry. I now rate her as amongst the most accomplished and talented financial planners. She also became a mum this year!
In addition, we have built an advice model that will help us to deliver world-class advice to a growing client base. We surround our clients with teams consisting of strategic advisors, practical planners and administration support. We believe that this model positions us for further growth while we maintain the personal relationships with our clients. On average, our team has more than 2.5 post-graduate qualifications each. I have now spent more than 25 years in financial services and each other team member has considerable experience in the industry. Experience counts, because human behaviour remains constant! Experience helps to understand clients and to prevent wealth-destructive behaviour. Experience also counts because cycles repeat. It helps to have lived through a market crash or have seen tax changes before.
We continue to focus on improved systems capability so that we can make our clients’ lives easier. Our aim is to become a paper free company. It is not as easy as it sounds – legislation increasingly requires more paperwork! In addition, we want to create a more collaborative digital environment for our clients.
In the past year, we revealed new and fresh branding and a modern, mobile friendly website. We publish lots of relevant content for you to enjoy and hope you find it useful. Join us on Facebook if you have not already. We also moved into our lovely new offices – a home from home. We hope that you have loved meeting us here as much as we have loved working here.
We would never like to lose the personal approach in our business. In our office, we cheer the announcement of a marriage, we celebrate the signing of a complicated will and we mourn when our clients lose loved ones or go through a difficult divorce. It is what makes us different. We care.
As I age (and reaching the half-time milestone), I increasingly seek meaning from my work. It gives meaning to help people with their real life problems. Wealthy individuals and families have complicated lives. It is an honour to help them navigate these challenges. It gives me meaning to see each team member grow in knowledge, expertise, confidence and stature. It gives me meaning to build a sustainable business, a brand and model that will thrive in a challenging future.
We thank all our clients for their loyal support and trust in us. I thank my team and their families for their encouragement and involvement.