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Treating Customers Fairly – another toothless dog?

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Treating Customers Fairly?

You’ve probably been hearing a lot of this in the news, and no doubt more is to come. Is it going to be another toothless dog in the FSB’s arsenal or might it actually have a positive impact on the man in the street?
At the risk of boring you ( but bear with me, some of that small print could be VERY interesting), these are the basic tenants:


  • Customers can be confident they are dealing with firms where TCF is central to the corporate culture
  • Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
  • Customers are provided with clear information and kept appropriately informed before, during and after point of sale
  • Where advice is given, it is suitable and takes account of customer circumstances
  • Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect
  • Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.

(Source FSB

If you want to read the whole thing, I have uploaded a copy on my website HERE.

I think you’ll all agree with me that this is act is way overdue, and potentially could see a massive overhaul of the financial services industry. It is just sad that one has to legislate for it.

The one sentence that really interests me is “Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.”
Mmmm… I wonder how that is going to play out with the insurance companies that charge penalties on RAs or Endowments that haven’t matured and that they happily charge penalties of 30% or more on the full market value? The ‘golden handcuffs’ that some providers use, whereby you will lose bonuses if you leave/claim are unlikely (IMHO) to be considered as ‘unreasonable’. Buyer beware I guess.
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Uncovered! So you thought you read the small print…

in Financial Plan, Wealth Ecology Leave a comment

So you thought you read the small print…

Just when you thought it was safe to sign a form without reading the reams and reams of fine print… along comes some new ways you get shafted. Here are some of the things to look out for, or ask your banker or advisor (in writing!)

Surety: You know that endowment you signed over (ceded) to the bank yonks ago, even 25 years ago? You know, the one for your little first home, long since sold… You’d have thought that because the ‘debt’ is no longer there, then the endowment ends too, right? Not so fast. If you’ve been a nice loyal customer and still have a bank account with the bank, maybe even the business has too – then it is highly likely that the surety will be retained for ANY debt or liability out there. My recommendation? If you have ceded ANY kind of policy for a debt or liability, get it removed as soon as the debt is over. If the bank refuses? Move! It is much easier than it used to be, any good bank will make sure your debits are changed themselves, saving you the hassle.

Cession: If you are required to cede a life policy, speak to your advisor first. A partial cession or a fragmented product might be a better alternative to signing over millions more than you need to. Another reason to be be cautious when you do this is that it will dramatically reduce the short term liquidity for your beneficiaries – because the ‘financial institution’ will take their sweet time to settle the debt, then give the remnants to the estate – adding insult to injury – now adding to the executor’s fees. Once ceded, it can be very difficult to get back.

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6 steps to simplify your investment portfolios yourself

in Investment, Wealth Ecology Leave a comment

DIY your investment portfolio

While it is great to have someone who keeps an eye on all your investments, that isn’t always possible. Here are some basic pointers on how I go about looking after my client’s investments that you can use yourself:

  • Summarise. Have a one page summary of all investments, with contract numbers, inputs, outputs and current value. This should be the first page of your investment file for quick and easy access, not just by you, but by your family or executor ( your ‘redfile’ will give you some ideas on this). A financial advisor should be able to get you a database printout for investments on insurance platforms if you’re looking for a shortcut or think you might be missing some. Need fund fact sheets to suss out your investments? I find this webpage very useful

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Get off your asset!

in Financial Plan, Investment, Wealth Ecology Leave a comment
Asset classes made simple

You have probably heard investment gurus and investors talk about ‘asset classes’ as if everyone was born knowing what they are. They are really important in determining how ‘risky’ your portfolio is, and what kind of short term and long term returns you can expect – and really it’s not difficult at all. If you learn anything about your investments before abdicating their performance to your advisor, this is it.

The ‘risk’ we are talking about here is more emotional than physical – but obviously the one can lead to the other. ‘Volatility’ is probably a better adjective. In other words how much the investment bounces around the ‘average’ or ‘mean’.
Cash is the least volatile, and only moves when the interest rate moves. It is considered the ‘safest’ investment – but that is more applicable to bank savings accounts (protected by the Banking Act) – than money market unit trusts (governed by the FSB) – as anyone who had exposure to African Bank will be well aware of.
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Holistic or Specialist – which works better for your finances?

in Financial Plan, Investment, Permanent Disability, Wealth Ecology Leave a comment
Magnificent 'slipper orchid', photo taken at the 21st World Orchid Show, Johannesburg 2014

Magnificent slipper orchid, photo taken at the 21st World orchid Show, Johannesburg 2014

Specialist/generalist – which one works for you?

We have all got so used to increasing specialisation in our lives, sometimes we don’t even question when it’s a good idea when it’s not – how about when it comes to your finances? I don’t want my plumber to do the electrical stuff in my house – but I would like my landscape architect and architect to work together, or be the same person. But that’s just me. In the medical field, medical specialists also make sense for specialist conditions – but the first stop is usually your GP.

So how does this translate to financial advisory?

There are some fields in financial advisory where specialisation is an absolute necessity – specifically asset management. Whether that is a stock broker, or the asset manager for a collective investment, you need someone who is keeping their eye on the ball. Yes, you can effectively run your own stock portfolio, but if you want to do any form of ‘hedging’ you are probably going to need collective investments, run by an asset manager. If you decide you want to invest in a ‘fund of funds’ – in other words a collective investment made up of other collective investments – then watch your Total Expense ratio, you will be paying asset manager fees on asset manager fees. It would be cheaper to ‘mimic’ that portfolio by buying up the mix of collective investments in your own investment, and balancing them periodically – your financial advisor can help you with that.

Financial advisors can still be excellent at investment without becoming a specialist, but they will usually only get involved with Collective investments – in other words leave the highest level of asset management to someone else. Not all brokers are comfortable with investments, with good reason. They can be extremely volatile, and clients can get very upset if they lose money, as a result they might be inclined to be too conservative for your long term needs, and use a couple of traditional unit trusts that have served well in the past.

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Love your bank? Make them the executor…

in Estate Planning, Wealth Ecology Leave a comment
Executors fees

An executor on your estate ‘only’ gets 3.99% of the value of the property – hell that’s only fair for a long and difficult job! Right?

Let’s see…

They get 3.99% on ‘property’ and not ‘deemed property’ – that’s usually life policies –unless you have put ‘the estate’ or ‘in terms of my will’ on the policy – then it goes to the estate and becomes ‘property’. So assuming you’ve put real beneficiaries into your life policies, then the executor uses other sources of cash to wind up the estate.

Married in community of property? The entire estate – husband and wife is aggregated into one big fat ‘property’ on death – but you knew that right? What you might not know is that the entire estate is now subject to the ‘executor’s fee! Twice as nice Tuesday! To add insult to injury, when the second spouse dies, they do it all over again – on the full estate!

But 3.99% is chicken feed for an arduous job, so let’s give them a break! Let’s look at an example. Spouse has a R10m property in her name, that’s it – apart from a bit of cash and a car. She leaves it to her hubby (section 4q, no estate duty). On her death, what does the executor have to do? Lodge with the master. Call the accountant to wind up the income tax. Call the conveyancer to transfer the house (the conveyancer does the rest). Close her bank account. Draw up a liquidation and distribution report (from a template – might take an hour). His/her fee? R399 000. Mmmmm…

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