Words Worth Reading

This month we enjoyed these articles.

Happiness is Other People

The happiness industry has been teaching us that we should cultivate happiness by ourselves through self-reflection and self-actualisation. It has left our generation lonely, sick and anxious. It turns out that research is clear – the single biggest contributor to our happiness is spending time with other people.

Happiness is Other People. Read the full article here



Three Kinds of Expectations

The Art of Simple published this great piece on the three kinds of expectations. While we’re examining happiness, you can also read about how we can improve our relationships by lowering our expectations! Yes, as we expect less from our loved ones, we have happier relationships!

Read more: Three Kinds of Expectations


The REAL value of a financial advisor

-By Elke Zeki


Many people believe that financial advisors add significant value by fund & product choice, asset allocation and budgeting. What concerns us is that research shows (and has for a long time) that there are algorithms that can do this much better than any human being can. Yet advisors are slow to embrace this technology. They see it as a threat and instead of adjusting their value propositions – they put their heads in the sand.

We argue that financial advisors can use this technology to their advantage.

REAL advisors offer skills and add value that’s difficult to quantify and calculate, and typically cannot be done by algorithms. We call it the REAL value added. This is what we believe you should actually pay for

What skills are we talking about? Let’s unpack them over these five points:


This is not an easy thing to do.

  1. From confusion to clarity

A REAL advisor should help you figure out what your goals are; and then what the solutions are to helping you achieve those goals.

People generally see an advisor to address specific issues or seek investment advice. This is often driven by questions raised through media or discussions with friends around the braai. This can be confusing and cause anxiety with regards to finances and investments.

It’s rare that advisors dig deeper to understand the bigger picture and help identify your most important values and life goals. A doctor always diagnoses before writing a prescription.

Understanding and defining these goals is like understanding a doctor’s diagnosis and treatment plan. You may ask for a prescription for headache medication but the doctor has to dig deeper. The sometimes-illegible prescription for meds you’ve never even heard of doesn’t matter if you actually get better.

In our view, the most important role of an advisor is not to prescribe the best solution, but to diagnose the problem first and to help by setting some long-term goals.

With clear goals that reflect your life stage and unique circumstances, it’s easy to stay focused on what is important.


2. Complexity and noise to simplicity

Most people don’t understand risk well enough to know what level of risk they are willing or able to take. Emotion plays a role in answering these questions. We believe an empathetic and analytical advisor is far better positioned to help come up with suitable solutions. This always trumps a series of generic questions.

Unfortunately, standardized questionnaires are widely used by advisors and can lead to inappropriate advice.

This often coincides with a variety of solutions presented to a client. This can also cause major angst because at the end of the day – how many of us actually understand which risk profile we fall under.

Advisors are also notoriously good with the technical stuff but make it too complex for people to understand. Add to that all the variety and clients are left confused. Complexity does not equal intelligence in money matters.

At Foundation Family Wealth, our sense is that people want clear guidelines and simplicity. It may be a complex process to get from A to B, but the most important thing for a person is just to get from A to B. Advisors that can do this in a clear and understandable way, add REAL value – often undervalued by the client.

3. Being mindful of human behaviour

Research shows that investors consistently underperform relative to the market benchmarks over time (https://www.dalbar.com/QAIB/Index). This is a global phenomenon driven by investor behaviour.   Advisors are not immune to making behavioural mistakes, however REAL advisors are aware of the problem and guide investors through market uncertainty and volatility. Sometimes it’s difficult to sit still or to stick to the same strategy, but often that’s exactly what you should do. This is again an important advisor skill underrated by clients.


4. Being a generalist

A skilled advisor can tie large areas of expertise such as investments, tax and estate planning together when making investment decisions and selecting appropriate products. Understanding the impact of tax on certain investments and staying on top of regulatory changes can add significant value when constructing an investment portfolio.

Tax structures and legislation changes a lot – which means that products and structures need to be reviewed and adjusted accordingly. The recent changes to trust legislation are a good example.

Having an advisor that can combine these skills and expertise and take into account your personal circumstances and your family situation, will not only save you time and money but will add significant value to your life.


5. The way you make me feel

It’s hard to quantify or explain, but sometimes we just go with our gut. We go with what feels right. An advisor that listens, shows empathy and asks strategic questions is more likely to get my business than the arrogant salesman. Foundation’s motto is Wealth for Life. This not only refers to preserving our clients’ wealth and capital for life, but also to using that capital to fund REAL life for you and your family. It also speaks to preserving the relationship between us and our clients.

So, next time you question your advisor fees or read about cheap do-it-yourself solutions, ask yourself what REAL value you’re getting in return.

Do you currently have a financial advisor or a REAL financial advisor? A good doctor has the ability to diagnose and treat a serious condition and possibly save your life. No wonder we don’t mind paying their fees. Similarly we believe that a REAL financial advisor can add significant value to your life that far outweighs their fees.


Credit to Carl Richards for his graphs and inspiration. And we can’t rave enough about his brilliant book. Read more here: The Behaviour Gap Book


The secret to happiness in retirement

-By Elke Zeki


Planning for retirement is one of the most interesting aspects of financial planning. Despite our vastly different circumstances and financial situations, we generally have the same underlying goal: to retire happily and in good health.

The desire for happiness and health is not just exclusive to retirees though. In our later years these things are just magnified because we have less distractions (like work or raising children) and more time to focus on ourselves.

A recent survey of millennials (done by the Professor of Psychology at San Diego State University) looked at what their most important life goals are. Over 80% of them ranked ‘having money’ as one of their most important goals. More than 50% of the same individuals ranked ‘fame’ and ‘image’ very high too.

The world’s longest study on adult development (done by Harvard University) followed two groups of boys over the course of 79 years – one group from a wealthy and privileged neighbourhood and the other from a very poor area. Over the years the researchers started including the wives and extended family members in their study. The program still runs today. This particular study found that money and fame don’t make you happy or healthier. Of course, we know this, but then what does?

Turns out that the key to happiness is relationships! Good strong relationships are just as important to your physical and mental health as eating well and exercise.

“People who are more isolated than they want to be from others find that they are less happy and that their health declines earlier in midlife. Their brain functioning declines sooner too, and they live shorter lives than people who are not lonely”. This is according to Robert Waldinger in his TedTalk entitled: “What Makes A Good Life”. He goes on to say that good, close relationships seem to buffer us from some of the slings and arrows of getting old. Watch the full video here:

TED talk by Professor Robert J Waldinger

We loved this research as we see evidence of this every day in our interactions with our clients! Even though we work with money and money related goals, it’s very rarely the thing that makes our clients happiest.

Our experience tells us that happily retired people all have the following in common:

  • They plan their retirement long in advance.
  • They know what’s important to them (i.e. their core values) – and they make sure that their financial plan is constructed with this in mind.
  • They live within their means.
  • They actively seek to replace workmates with playmates.
  • They focus on the important relationships in their lives. Quality over quantity.
  • They focus on fitness and health.

One client told us a lovely story about a little old lady she knew who was visiting the doctor. She was not wealthy but viewed herself that way because of her children and grandchildren. As she left the doctor’s rooms he picked up her purse from the chair and handed it to her. Feeling the weight he jokingly said, “You must be very rich” to which she replied, “Yes, I am indeed”.

In a world where we are easily distracted by social media, money, fame and privilege, let’s not forget what truly matters. The wonderful thing about relationships is that it’s never too late to work on them. And what better time to invest in these than over the upcoming holiday season.


Topline: The Market This Quarter

By Thiart van Der Merwe

Quarter 3 Review


Source: PortfolioMetrix


There’s been a rally in SA equities in the last quarter. Some sectors have done really well. If we compare the returns to the rest of the world however, we are lagging. Why? Own goals on the political front.

Against our Emerging Market peers, we have underperformed by more than 50% over the last two years in dollar terms.

Global sentiment is certainly picking up with investors seeking high yields across the globe due to depressed interest rates in the developed world. We continue to see inflows into our own bond market despite the credit ratings downgrades and political uncertainty.

China posted returns in excess of 40% for 2017. Sentiment out of Europe is also improving with good returns from the major European countries. The story in Europe will unfold as the European Central Bank looks at its monetary policy and its QE-program (Quantitative Easing).


Source: Investec Asset Management


Domestically, earnings growth has improved by almost 30% year-on-year. This was partially driven by some of the resource stocks reporting satisfactory results. Resources have been the standout performer from an investor viewpoint – up 17.8% for the three months ending September. One of the contributing factors was an uptick in commodity prices with The Economist Metals Index recovering from the deflated prices in 2015. The All Share Index’s Price to Earnings Ratio, which measures how expensive the index is, has dropped from 22.8 in October 2016 to 15.3 in September 2017. This indicates a cheap domestic market and generally appetite increases at a lower PE ratio.

Foreigners have been net sellers of SA equities in September following the trend over the last two years. This is a further indication that despite the improving earnings figures, we are lacking investment into our local market. Although politics may not be the only factor, the uncertainty of what happens after the ANC conference in December and policy direction chosen, plays a significant role in this lack of investment.



Source: Google Images


As the #GuptaLeaks emails were scrutinized, some big private sector firms got caught in this web and are starting to face the music. KPMG withdrew their findings on the controversial SARS Spy Tape Report that was instrumental in the axing of finance minister Pravin Gordhan. The repercussions were severe as eight senior executives resigned and large firms that used KPMG have taken their business elsewhere. The financial impact could cost KPMG their place as one of our top audit firms with analysts predicting an exit from SA within 24 months.

Internationally, Bell Pottinger and McKinsey are facing the same fate as they came under fire for their ties with the Gupta’s. The US regulators have been alerted on the McKinsey debacle and possible fraud. If they do intervene, that could turn this into a criminal case that may even lead to prosecutions. Not so long ago we saw leaders from Emerging Market countries such as Brazil and South Korea getting sentenced to jail for corruption – so a similar fate may await some of South Africa’s political elite. This could take years to resolve but there is a good chance that we will see some connected individuals and politicians behind bars.

Global Consumer Confidence

Source: Stanlib


In a survey by IPSOS that measures consumer confidence in 24 countries, SA was the only country that recorded a noticeable drop in confidence – down roughly 3%.

Interestingly China leads the pack both in consumer confidence as well as global returns.

In September, business confidence in SA fell to its lowest point in 30 years. Economists point out that to fix our economy, we need to fix confidence. The lack of confidence is also evident in the cash piles of over R1.4 trillion of JSE listed companies according to the Centre of Competition, Regulation and Economic Development. The reluctance of the private sector to invest can directly be linked to the lack of confidence and the uncertain political environment that we are heading into with the ANC Leadership Conference coming up in December.

War of Tweets

Source: Twitter


Could a war of tweets potentially lead to World War 3?

In recent weeks, North Korea has performed six nuclear tests with the main aim to hit mainland United States with a nuclear tipped missile.

Trump has reiterated that talking is not the answer – indicating that an attack on North Korea could be the only solution. The UN has imposed further sanctions on North Korea that could cost them an estimated $1 billion per year. The effectiveness of the sanctions would rely heavily on China and Russia’s enforcement, which has been lacking in the past.

Underpinning President Trumps’ campaign from the get-go is the “America First” rhetoric – aimed at establishing a sense of nationalism with Americans. Unfortunately this has not translated well – and has caused further division – often interpreted as an America for white supremacists. One can only hope that this doesn’t contribute to full-scale war.

Markets have shown short-term volatility with jumps in safe haven assets such as gold, but there has been no significant market reaction to this as yet. May sanity prevail as this is a major geo-political risk that will hurt returns across the spectrum.

In Summary

Source: PortfolioMetrix


Local equity had a very good quarter – up roughly 9% over three months. This was mainly driven by a rally in resources. With all major indices in positive territory, there is more appetite for riskier assets worldwide. There are signs that economic conditions are improving worldwide. Historically when markets are cheap – prices tend to go up. Time will tell whether South Africa can overcome our structural issues and share in the positive global sentiment.


Bitcoin: The good, the bad & the ugly

– By Thiart van der Merwe 


Bitcoin and cryptocurrencies are a hot topic at the moment. Everyone wants to know whether they should invest in Bitcoin. It is not surprising given that $100 invested 18 months ago, would be worth $1000 now. This kind of growth attracts attention. What is Bitcoin and what is the fuss all about? This YouTube video explains this complicated concept in simple terms:

Bitcoin: How Cryptocurrencies Work

A few facts

  • Bitcoin is the best known of the digital currencies that is traded on a peer-to-peer network.
  • One can send Bitcoin to someone anywhere in the world as payment for goods or services.
  • Instead of a bank that facilitates the transfer of money – you have a public ledger that records every transaction that takes place. This public ledger is referred to as the Blockchain.
  • Transactions are captured on the ledger in what is known as a block, which is then verified by volunteers (called miners) all over the world.
  • These miners (using computers) figure out complex mathematical problems and are rewarded with Bitcoin for every block of transactions verified.
  • The reward started at 50 new Bitcoins for every block created – but this reward halves for every 210,000 blocks created.
  • This means that there is a limit of 21 million Bitcoins that can be created. In this way hyperinflation is avoided and is a key driver behind the value of Bitcoin.
  • Bitcoin is decentralized as there is no government or authority that can make more coins or keep track of fraud.

There is no denying that Bitcoin is one of the most interesting and brilliant inventions of our time.

Let’s look at the good, the bad and the ugly when it comes to Bitcoin:

The Good

Bitcoin, like many new technologies is revolutionizing the way that we can transact and interact with the world. Disruptive technology such as this can improve the efficiency and speed of transactions and lower costs. A globalized currency means less interference from central banks to drive the value of their respective currencies up or down.

Cryptocurrency has the potential to reach the poorest countries to improve lives by making transactions easy and accessible to all. In many emerging economies access to money is limited to black market trading and inflated to much higher rates than it should be sold at. Whether Bitcoin will reach and impact these poor communities is something that we will have to wait and see.

As an example, Project Ubu (Universal basic unit) is an initiative from South Africa aiming to create the world’s first, fully-fledged decentralized currency targeted at the country’s lower income group. Read more about this here: Project Ubu

The Bad

Financial institutions have certain rules and acts that prevent the fraudulent transfer of money. With Bitcoin, there is no regulatory body and therefore coins can be used for criminal activities – although the payments themselves seem more secure than most bank transactions. We have already seen North Korea set up a massive mining plant to generate Bitcoin and exchange these for services and products worldwide. This means that sanctions may become ineffective.

With the recent Ransomware virus, the hackers asked to be paid in Bitcoin. This is an example of how criminal activity can take place electronically without zero verification for the actual account holders. It may be difficult to stop money laundering and illegal transfers with a currency that has no central regulator. This is why China banned the use of Bitcoin. How many more governments will follow suit?

When it comes to fraud, it is important for Bitcoin investors and users to know that there is very little protection by regulators or laws anywhere in the world. Users have lost money on exchanges of cryptocurrencies operated by fraudulent schemes.

The Ugly

Generally, when stories reach headlines, become topics on investment shows and get analysts predicting “massive growth”- it indicates a “bubble” or overvalued and hyped up asset.

“Technology has advanced greatly, but human psychology is still the same,” Robert Prechter. This has happened many times in history: investors get so excited about the prospects of super profits that they invest their life savings into a “bubble” that ultimately bursts.

A few examples:

  • Tulipmania in the 1600’s: At its highest value a single tulip was worth an entire state and at its lowest it was worth the same as an onion.

Is this the latest “bubble”?

It’s hard to tell, especially because this is a new technology and we do not know how to value it. As a payment method, it looks secure. However, investing in Bitcoin looks far less certain. Bitcoin is created as a payment method like a US Dollar or the Euro. It is not a company with profits or prospective projects. It will be driven purely by supply and demand of the currency itself. Traditional currencies are impossible to forecast other than perhaps the general long-term direction. Completely new payment methods with new uncertainties make it even harder to predict.

Should you invest?

As a payment method, cryptocurrency is a brilliant concept and is likely to change the future of payments and the financial industry. However, the investment merits are questionable.

A major risk for investors is potential future regulations. We have already seen the impact that China’s decision to ban Bitcoin had on the value of Bitcoin. In addition, Bitcoin is not the only cryptocurrency out there with only 49% of the market cap. New entrants will increase the supply of cryptocurrencies which could drive demand away from Bitcoin.

As with all new technologies, it is likely to run a different course than initially anticipated and there are risks. It is not certain that Bitcoin will be the Amazon or Apple of the cryptocurrency world.

We would not advise anyone to stash their life savings in Bitcoin. At best, Bitcoin is highly speculative – there are simply too many unknowns and at worst, it could be disastrous.

To leave you with a quote from Warren Buffett, “Never invest in a business you don’t understand.”


Foundation Family Wealth is an Authorised Financial Services Provider