A year in review

-By Sunél Veldtman

At the beginning of every year, it is my custom to write a review concerning the last year in our business. I like to stand still and reflect on what has happened, but also on what we anticipate and want to happen.

This last year has been a year of extremes for us at Foundation Family Wealth. It was probably one of the best years in financial growth for our clients and our business, but it was also filled with sadness as our team lost many clients, family and friends to death.

Many of these clients were clients long before we started Foundation. We journeyed with them through many years of life. We took some of them through retirement and lived through the death of spouses. It has been difficult to say goodbye. And now, we are working with those left behind, helping to pick up the pieces and plan. We believe that intergenerational wealth protection can be achieved if the heirs are educated, informed and involved in the planning. It is why we have launched an incubator service for younger clients. This service helps set up the children of our clients, right from their pocket money through to their first salary check.  It is important that they become experienced in the money world and financially independent in their own right before they inherit, but that they also develop an understanding of how to deal with their inheritance in the future.

It is what we believe good financial planning is – being there throughout and beyond the lifetime of a person and their extended family. Financial planning is so much more than selecting good product or ensuring good growth of portfolios. Good financial planning is about ensuring that wealth brings you rewards throughout your life and beyond.

Over the last year, we have seen the benefits of this kind of thinking positively realised for our clients as disruption has made the world more uncertain and the complexity of life has continued unabated. Financial planning is not about forecasting the future but about planning for a future regardless of what the future brings. If we do not plan, there is only a slim chance that the future will resemble anything like our dreams, hopes or even our smallest expectations.

Over the past year, we have lost clients to emigration. Many families no longer see a future for themselves or their children in South Africa and emigration is a hotly debated topic. We have seen that proper financial planning can help our clients navigate the emigration transition better. Typical to most transitions, it is fraught with many pitfalls for wealth destruction. As emigration continues and clients need more advice during the decision-making and implementation phase, we will expand our services in this area and team up with legal and tax specialists to provide solutions for clients.

Last year, I spoke at the inaugural Humans Under Management conference in South Africa, which brings together industry colleagues to discuss the human factor in financial planning. My talk, Humans Under Transition, was the culmination of many years of work with clients going through a divorce, loss of a spouse, retirement or retrenchment. We now believe that we have very specific skills for helping people navigate transition. In stressful times, like now, we believe we can make a difference to those processes by bringing our skills and experience to the table. In 2020, we will offer a new workshop for those going through a transition.  It will focus on helping clients strategically think through the impact of transition on their money and their lives.

Despite South Africa still hovering around recessionary conditions, our clients’ portfolios showed handsome returns over the past year, bringing their long-term returns to satisfactory inflation-beating numbers. These returns were helped by the healthy global exposure of our clients’ portfolios but also by the disciplined asset allocation methodology and fund choices of Portfoliometrix. The team at Portfoliometrix were once again recognised as the Best Discretionary Fund Manager in London by winning Citywire’s Wealth Manager Regional Stars Greater London award, highlighting their advanced expertise even in the global arena.

The local political and socio-economic conditions remain concerning. While the media and popular commentators focus on immediate risks such as a credit downgrade and the fixes for the tragic state of SOE’s, we are more concerned about the long-term risks. High unemployment, poor education (which leads to low productivity), disrespect for the rule of law, the attack on property rights and most of all, the huge gap between rich and poor in the country are all factors pointing to increasing social unrest and the high probability of populist policies. Financial planning should take these risks into account, not only by high global exposure in portfolios but in all areas of planning.

Added to this is the challenge of investing in developed markets, which has seen some of the best returns in decades recently. Although we are acutely cognisant of the risks of local investments, we think that the local market may surprise when value unlocks from these depressed levels. We do not agree that one should sell from South African investments at any cost. A disciplined diversification process is far more likely to generate the best outcome for clients.

Further to the local challenge, is that of dealing with the uncertainty caused by disruption through technology, demographic trends, climate change and the shifting global order. These challenges, of which we wrote about last year will disrupt our clients’ careers and saving patterns. We are already seeing shorter careers.  This, coupled with our increased longevity, means we need higher savings. It will require a different approach to financial planning – planning will intersect with career coaching and lifestyle coaching to ensure the longevity of income generation.

Another trend, which has taken hold and is concerning for wealthy families, is the increased scrutiny by global authorities into the source of wealth. Not only does it make investing more cumbersome, but it sometimes requires financial advisors and bankers to divulge personal information about the persons behind investment companies or trusts, and in some cases, that information is now made public by authorities. It puts wealthy families at risk as targets for criminals. Cyberattacks, extortion and kidnapping are real risks for the wealthy – it has also come very close to us in the last year. We actively advise clients to become more discreet in their display of wealth, to protect them from becoming a target.  The loss of privacy and increased danger is the price we pay for the increasing and unsustainable difference between the rich and poor in the world.

Another price is in increased taxes – in South Africa, we will feel this in the coming years but globally it is also likely that taxes will increase as governments pick up the tab for all the disruptive forces at play.  The most noticeable is likely to be climate change and large-scale job losses due to technological advances.

All these forces will increase the need for financial planning done well. We are now seeing the convergence of financial advice, wellness and coaching in this space – and in response, we have put teams around some of our clients to support them through difficult transitions. We will continue to see this trend develop. It’s why our team is participating in coaching training this year and why we continue to build our ‘soft’ skills. Traditional financial planning may likely be taken over by artificial intelligence, but the human factor will still be necessary as we help fellow humans navigate through these changes and work to more individualised planning.

We see an increased need for refined financial planning and coaching, and we derive purpose and energy from our life-changing work. We are acutely aware of the privilege of our amazing work: the privilege we have, every day, of supporting our clients through these challenges and planning how their wealth can be used to positively shape their lives.

<Foundation Family Wealth is an Authorised Financial Services Provider>

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