Author: John Campbell

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SA and the world: slowing, but growing

SA and the world: slowing, but growing

Recently, I have witnessed my father grappling with illness. He has been in and out of hospital, trying hard to maintain his characteristic strength. 

It has been a unique experience for me to see him dependent on us and on medical staff. To our family, Peter Campbell has always been that man to whom we look for decisive action and a refusal to give up. 

Times of uncertainty tend to highlight our fears, and often prompt personal introspection.  I have been reflecting on my own example set for my children that will help them when they face their own challenges as they grow.

The reality of the South African situation

Uncertainty has certainly been a theme in my past year’s communications.  The passing of the presidential baton to Cyril Ramaphosa, the unearthing of so much dishonesty, the reports of how state-owned enterprises are buckling under the loss of revenue owing to corruption … all of these can leave us wondering where to from here: in the dark (often, literally!).

Another emerging theme, though, in the wake of this year’s SONA and Budget Speech, has been gratitude for the new leadership in contrast to the former Zuma regime – you can read my Budget Speech comment by clicking here

In the words of Investec Asset Management’s Jeremy Gardiner: “One shudders to think how angry and depressed we would have been if we still had Jacob Zuma as President, with the prospect of another five years of the Zuma presidency after elections. We would still have Finance Minister Gigaba running what would be an officially (across all three rating agencies) junk economy and similarly junk currency, probably around R25 to the US dollar.”

Jeremy’s economic update at Chartered earlier this month was entitled: Signs of Spring? (you can read his full article by clicking here). He suggests that many South Africans have reached their ‘capitulation point’ – angry and disillusioned.  Many may feel that they are powerless in the face of rising petrol and electricity prices and further evidence of the crippling of state-owned enterprises. 

The power of perspective

Unsurprisingly, you can find both positive and negative responses to our global and local political and economic context.  Biznews Editor, Alec Hogg, reported on 11 March that “Africa is back in fashion” among global investors, according to the most recent issue of The Economist.  This publication dedicated four pages, including its lead article, to “The New Scramble for Africa”. Hogg himself views the low South African share prices as an opportunity to buy, not despair.

South Africa will lead the pack, says Hogg, “if president Cyril Ramaphosa achieves his objective of making the country the continental gateway”.  Of course, fixing the country remains a priority, especially Eskom, and holding looters to account.

The power of choice

When it comes to that legacy of character I want to leave my children, I turn to the words of Viktor Frankl, Holocaust survivor:  ”When we are no longer able to change a situation, we are challenged to change ourselves.”

In the context of South African – and global – uncertainty, I want to model an attitude that demonstrates the power of personal choice.  We all undoubtedly will find ourselves in circumstances that we cannot control in the course of our lives (illness, the economic and political situation, the markets dipping, corrupt practices), but we still all certainly have the choice regarding how to respond.

In line with this philosophy, I will be casting my vote on 8 May, in the belief that we all have a role to play.  As a Financial Planner, I want my clients to know that there is always more value in having a financial plan than none, especially when there is market uncertainty. 

I am always grateful to clients who express gratitude for and confidence in Chartered and our approach to financial planning. We are committed to seeing each of our clients retiring successfully.

Warm regards,

John

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The 2019 Budget Speech: planting seeds for a future

John-CambellFinMin Tito Mboweni made his goal for the annual Budget Speech clear by referencing Biblical agricultural imagery.  The message?  To create a prosperous harvest, you must plant anew.  Acknowledging the shortcomings of the past – “despite our best efforts, sometimes, ravages and risks such as pests or rot could attack our green shoots” – the Minister called on South Africans to persevere, reminding them that “we must take the bitter with the sweet. Today, I bring you a seed to prove that if we plant anew, we can return to those plum times.”

Let’s have a look at the detail of what that ‘seed’ is going to mean for us as taxpayers.

Personal income tax

No changes will be made to personal income tax brackets.

Tax thresholds (the amount of income you earn before you need to pay tax) will slightly increase.

  • If you are under 65, and earn up to R79,000 during the tax year, you will not pay any tax on this amount.
  • If between 65 and 75, you will not pay any tax if you earn less than R122, 300.
  • If 75 and older, you will not pay any tax if you earn less than R136,750.

By not adjusting the income tax brackets for inflation, the government will raise R12,8bn.

No adjustments to medical aid tax credits

Medical tax credits have been not been adjusted for inflation, so that means when you pay your income tax, you can still claim R310 (per month) for each of the first two persons covered by the Medical Scheme, and thereafter R209 (per month) for each additional dependent.

Interest exemption

The interest exemption amounts remain the same. If you are under age 65, the annual interest exemption is R23,800, and if you are 65 and older, the exemption is R34,500. So, for example, you have R690,000 in a Money Market fund, earning 5% per annum interest, and you are over 65, you will not have to pay any tax on the R34,500 interest that you earn.

Tax-free savings account contribution

You can still contribute R33,000 per year toward these investments, in which all returns are tax-free.

Dividends Withholding Tax

This remains at 20%.  If you hold shares and a dividend is declared of, for example, R120, R24 will be deducted by the company issuing the dividend, and you will receive an after-tax amount of R96.

Donations Tax

You can donate R100,000 each year to anyone you wish, without attracting Donations Tax.  Amounts in excess of R100,000 attract Donations Tax at a flat rate of 20%.  Donations between spouses are exempt from Donations Tax.

Retirement Fund contribution deductions

There has been no change to the amount that you can claim as a tax deduction towards your retirement funds. The deduction that you can claim is the lower of 27,5% of your taxable income or R350,000 per annum before the inclusion of taxable capital gains.

Capital Gains Tax (CGT)

There has been no change to Capital Gains Tax. Capital gains are triggered by the sale of an asset such as your home or a unit trust.  The maximum effective tax rates are:

  • Individuals and special trusts: 18% (inclusion rate of 40%)
  • Companies: 22.4% (inclusion rate of 80%)
  • Trusts: 36% (inclusion rate of 80%).

The capital gains exemption thresholds remain the same:

  • The annual exclusion stays at R40,000
  • The exclusion amount on death stays at R300,000
  • The primary residence exclusion stays at R2 million.

If, for example, you withdraw R100,000 from your unit trust investment, and you initially invested R20,000, you would have triggered a capital gain of R80,000.  The first R40,000 of this gain is exempt, and thereafter, 40% of the remaining R40,000 is added to your taxable income, and you will have to pay income tax on this.

Estate Duty

Estate Duty remains unchanged.  Duty is levied on the dutiable value of an estate at a rate of 20% on the first R30m and at a rate of 25% above R30m. The Estate Duty abatement (exemption) remains unchanged at R3,5ml for each individual.

Anything left to a surviving spouse does not attract Estate Duty on the death of the first spouse.

Changes to Transfer Duty

There have been no changes to Transfer Duty.

Tobacco, alcohol and fuel

A pack of 20 cigarettes will cost you R1.14 more.  Your can of beer will cost you 12c more, and your can of coke will cost you 0.11 more per gram (sugar tax).  A bottle of wine will cost 22c more, and whiskey is R4.54 more.

General fuel levy increases by 15c per litre and road accident fund levy increases by 5c per litre on 3 April 2019.

A new carbon fuel levy at 9c per litre on petrol and 10c per litre on diesel will be introduced with effect from 5 June 2019.

Conclusion

The burning issue for many South Africans has been, not personal implications, but what stance the government is taking on State-Owned Enterprises such as Eskom, SABC, SAA and Denel.  While R23bn has been set aside per year to support Eskom during its reconfiguration, the FinMin emphasised that the government will not be bailing out these enterprises, but rather curating them more carefully through the appointment of Chief Reorganisation Officers.

Warm regards

Warm regards
John 

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2018: a good year that changed gear

2018: a good year that changed gear

John_Campbell_BlogLast week, I reviewed my first newsletter of 2018: Zuma out, Ramaphosa to be inaugurated, the rand strengthening 11.65 to the dollar (the best in four years) and our stock market at an all-time high. Sentiment was positive, and it looked like 2018 was going to be a good year.

Now, looking back, we wonder what went wrong …. Clearly, the rot caused by the Zuma era runs deeper than we imagined. Our economic challenges were already set to make a 2018 a tough year, but our local corporate issues have magnified the negative impact on our markets: Steinhoff’s share down more than 90%; Tiger Brands’ Listeriosis crisis; irregularities at Resilient and NEPI with a huge share price drop and impact on the Property Index; debt and sale of a division of Aspen Pharmaceuticals; MTN’s Nigeria woes;
and, more recently, the drop in Naspers share price on the JSE, amounting to 6% of the 10% loss we have suffered to date. (Naspers is the largest share on the JSE and it has lost
23% this year.)

Fortunately, our commodities have softened this blow, without which we would be close to 15% down for the year. The Global markets and South Africa have enjoyed the longest run of positive returns in the history of share markets, so a correction was expected – though it is never well received and timing is uncertain.

Where Financial Planning fits in
I attended the annual Financial Planning Association Convention in Chicago, the largest gathering of Financial Planners from around the globe with 35 countries represented … and one South African delegate! It’s my fourth global conference in a decade, and I apply the insights, practical strategies and knowledge in our business.  I noted a digital billboard stating that 837 lives had been
lost in road carnage since 2011, as a warning to drive carefully. I arrived at the Hyatt to find a large group of employees striking, playing drums and making a racket (we are definitely more vibrant!). I was reminded that every nation has its problems – often we think we have it much harder in South Africa. To top it, my hotel room faced a Trump hotel, so I was greeted by the word TRUMP in massive lights as I opened my morning curtains.

I thoroughly enjoyed the conference, listening to the most incredible speakers, many of whom are very highly qualified specialists in their fields – I met my first Doctor of Financial Planning! I learned from the Global Head of HSBC that their planners write over a million plans a year.

The Americans have the most interesting organisations; I met the founder of the Financial Psychology Institute, a researcher from the Stanford Centre of Longevity, and so it went. My takeaways are that our business, strategy and planning techniques are right up there with global standards and we shall continue to ensure that our Retiremeant™ Specialists and our business exceed this benchmark.

At Chartered House
I am excited to say that, on 1 November, Chartered Invest went live. This is a business we have formed to implement and consolidate your investments. For years, we struggled with clients having investments spread across various businesses like Old Mutual and Investec, with perhaps a few unit trusts at Allan Gray and Coronation. Every month they would receive from each business a different statement, difficult to read and understand.

We can now accommodate all your investments on one platform and give you one statement reflecting everything you have. This not only simplifies your life and removes clutter and confusion, but also allows us to access all your information on our system – no more dealings with numerous inefficient call centres.

So, you can receive one statement with your Living Annuity invested through Old Mutual and your tailored portfolio invested with PMX – all on one report. You will learn more about this in your next review meeting.

Warm regards,
John Campbell

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Caring for clients finds new expression at Chartered

I recently attended my 30-year high school reunion – what a bittersweet occasion.

I enjoyed reconnecting with former friends, reliving some fond memories and valiantly joking about those I would rather forget. What I did note is that time stands still for no-one, and the passing of time is evident in our hairlines (mine silvering, others gone!) and faces.

What has not disappeared is the very real sense of camaraderie that humans somehow create and sustain when they care about each other.

It put me in mind of the changes that are happening at Chartered Wealth Solutions … and the carefully considered rationale behind them. As always, our relationship with our clients is at the centre of them.

Here is a brief summary of developments that you, our clients, will be seeing:

New reporting

If you have been a recipient of the weekly Interest statement from us, you can expect to see a new and improved version, entitled Navigating the Tides, from 1 July. Our goal with this updated format is to ensure that you are informed regarding weekly market highlights, especially as they influence your investments.

“This new format is much more reader-friendly.”

For those who have previously unsubscribed from this communique (possibly because the method of reporting was too convoluted), we have resubscribed you in the belief that you will find this new format much more reader-friendly. Should you not wish to receive this communique, you are welcome to unsubscribe by clicking on the ‘Unsubscribe’ button.

In addition, we are developing a consolidated reporting statement on your investments – with the same rationale: to make potentially complex information much more accessible; this will comprise quarterly statements. You will be updated about this in time, but, you may chat with your RetiremeantTM Specialist in the interim, should you have any queries.

In-house suite of services

Many of our clients have engaged the services of our legal team over the years, in meeting their Wills and Trusts needs, and in resolving any Estate issues. Our Legacy and Trust team has grown and continues to give our clients excellent service.

In the latter half of last year, we welcomed Charmaine Prout and her team as Chartered Tax. As those clients who have worked with them can attest, they certainly go the extra mile … but you can read about them yourselves in the interview with Charmaine in this newsletter.

I have mentioned Chartered Invest in a former communique, and will continue to keep you updated on this part of our offering in the course of the year.

Finally …

In keeping with our mandate to help clients retire successfully, this issue of The Beacon includes a client story of Alex Isaakides, who, recently retired, has found meaning in a whole new area of interest. You can also read about our most recent client functions around the country.

Warm regards
John

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When the markets cause concern, consider context

When the markets cause concern, consider context

What is your burning question? If you were seated, face-to-face with your financial planner right now, what would be that top-of-mind concern that you would raise?

I got a sense of the answer at the most recent Retiremeant™ workshop, our third in Johannesburg, when I asked the audience, comprising clients and their guests, “What would you most like me to share with in the time we have together?” The unanimous response was: the flat market conditions.

It is the same question that has been emerging in our client review meetings, where the reporting cycle preceding it has reflected flat returns.

I thought, in light of this understandable sense of disquiet, that I might share some points to lend perspective.

The relevant reporting period
The reporting period is the period over which you measure your returns. For most people, it is the day on which you invest your money until the end of the most recent month.

I found the following stats quite interesting:

* If we go back three years from December 2017, we see that the JSE yielded an 18.5% return

* Three years from 31 march 2018, and the JSE only gave you a 6% return (this is why the last quarterlies statements looked so poor)

* Go back three years from the 31 May 2018, and we have a return of 10%.

So as you can see there is quite a difference in returns across these three periods which are within six months of each other.

The same applies to the currency, US$ to the rand. Looking at the three periods in rands, you either gained 7%, lost 2% or gained 4.3%. This variance can be quite significant. This is why the recommended term for investing in equities is seven years plus: over the short to medium term, returns are highly volatile. We are gratified by the fact that we have had no negative years since 2008, the longest period in history without any negative years. If we look at the five-year and seven-year performance, we are comfortable. It’s through these inconsistent returns that we must sit tight.

A local and global trend

Blaming the asset manager might be a valid response, were the markets going up and your investments were not. In reality, it’s the investment markets as a whole that have really struggled this year, both locally and globally, so it’s not fair to blame the asset manager.

Our JSE is down 6% this year and most of the global indicies are in the same space. Both PMX and OM Multi managers are doing the best they can, ensuring you have a well-balanced portfolio spread across various asset classes, and also across a number of world-leading asset managers.

We will share updates with you in your review meeting: information relating to market performance; we aim to give you a greater understanding of the current investment climate. It’s useful to remind ourselves that last year was probably the toughest year for South Africa in the post apartheid era: sentiment was at an all-time low, yet our JSE still delivered a 21% return.

Change in Chartered’s reporting to clients

At Chartered, we have been working on creating a reporting communique that is comprehensive and easy-to-read. We are happy to announce that, from the beginning of July, you, our clients, will no longer receive the communique entitled Interest. Rather, you will receive Navigating the Tides which is your new weekly economic market update. If you have unsubscribed before, you will find we have re-subscribed you, giving you the option to consider this new format. If you don’t receive it, please check your junk mail or spam folder – your server may be filtering it out.

As always, Chartered Wealth Solutions is hard at work to continue improving on the service we offer our clients, and to keep our relationship based on trust and reliability. I appreciate discussions with our clients, be it face-to-face at events or via email, so feel free to continue to communicate with me.

Warm regards

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Your quick guide to the toughest budget in years

We’re not even two months into the year and we’ve already seen some game-changing political events.

Our new President was sworn in on Thursday, 15 February – almost 18 months sooner than expected – and we wish Mr. Cyril Ramaphosa every success in returning South Africa to an all-important economic growth path. A growing economy makes our lives that much easier in that it improves the outlook for investment returns and reduces the pressure on government to raise income tax. And that brings me to the topic of today’s communication: the 2018 Budget Speech.

There has been so much political noise over the past two months that we were left wondering whether the Budget Speech would even take place today – and as recently as yesterday we weren’t even sure whether the current Minister of Finance, Mr. Malusi Gigaba, would take to the podium. But sanity prevailed, and the speech went ahead at 2pm as planned.

Budget day is an important ‘marker’ in the financial planning year. It is held near the tax year-end of 28 February and is a great time for you to focus on getting your tax planning right and to take advantage of any ‘tools’ to save tax efficiently, in line with your Retiremeant™ plan, of course.

What did we expect from the Budget?

Most analysts quoted in the media in the past two weeks predicted a tight budget. You need only look at some of the key issues to appreciate National Treasury’s problem … They are struggling with slow economic growth; a R50.8bn shortfall in revenue collection for the current tax year; and rising expenses due to the funding demands of free education and National Health Insurance. These projects are consistent with Government’s focus on socioeconomic transformation as they strive to overcome the inequalities and divisions so apparent in our society.

What did the Budget Speech reveal?

At the outset I should say that the 2018 Budget Speech is one of the toughest that we’ve seen in many years, but this wasn’t unexpected. Chartered Wealth Solutions predicted that the 2018 Budget would be extremely tough on High Net Worth (HNW) clients, difficult for the middle class and largely neutral for the rest. And we had it spot on!

Our expectations were confirmed early in the speech. An additional R36 billion is being raised through a combination of tax increase, mainly through a higher VAT rate and below-inflation adjustments to personal income tax brackets. We summarise the main tax proposals as follows:

  • An increase in VAT from 14% to 15%;
  • A below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets;
  • An increase in the ad-valorem (proportional) excise duty rate on luxury goods from 7% to 9%;
  • Estate Duty will be levied on the dutiable value of an estate at a rate of 20% on the first R30 million, and at a rate of 25% on the value above R30 million;
  • A 52c per litre increase in the levies on fuel (22c for the general fuel levy and 30c for the Road Accident Fund); and
  • Increases in the alcohol and tobacco excise duties of between 6% and 10%.

There were no changes to the marginal rates of individual income tax, the rate of tax on trusts (45%) or the rate of tax on companies (28%). Transfer duties on the sale of properties remained unchanged too, with a 13% tax on the portion of the transaction exceeding R10 million.

The feared removal of medical-schemes tax credits did not materialise either; but the increases were minimal – from R303.00 to R310.00 for the main member and first dependent, and from R204.00 to R209.00 for each additional beneficiary. Other good news is that there were no changes to the tax treatment of retirement fund lump sum benefits or severance benefits.

What does it mean for you, near retirement or in retirement?

We were a bit disappointed on two fronts: firstly, the R500,000 tax-free portion of the retirement lump-sum benefit was not increased; and, secondly, there was no increase in the maximum contribution in either Retirement Annuities or Tax-Free Savings, being 27.5% of Retirement Annuities contributions capped to R350,000 and R33,000 for Tax-Free Savings contributions per annum respectively.

The changes in Estate Duty apply to estates worth more than R30 million and will affect High Net Worth individuals who will have to review their financial plans and estate plans accordingly. We note that the basic deduction allowed under this tax heading was left unchanged, at R3.5 million. We will be communicating more on this in due course.

What happens next …

You should not make hasty financial decisions based on the changes announced in today’s Budget Speech. Your best approach is to stick to your RetiremeantTM plan and make considered changes to your portfolio over time based on the advice of your Retiremeant™ Specialist, thus continuing your journey towards a secure RetiremeantTM based on your lifetime goals and dreams.

We invite you to contact us if you have any concerns about the Budget Speech and what the various changes to taxation rates mean to you.

Warm regards
John Campbell

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Good news to welcome us to 2018

I have so enjoyed the start of 2018 – it is so uplifting to read the papers, to listen to the news and, for the first time in many years, to feel that there has been a shift and things are starting to happen. We have a long road ahead, but certainly, with Cyril at the helm, there is progress.

I walk past our table in reception where our newspaper lies and see the headlines that the JSE has reached an all-time high and, in the next article, the rand is recorded to be the strongest it has been since 2015. Long may the good news continue to flow!

Our next big hurdle is the Budget Speech towards the end of February. The ratings agencies have put things on hold until this time to see what plans our Minister of Finance has for finding the R50 billion shortfall and the funds for President Zuma’s shock announcement of free tertiary education for low-income earners. I have heard many mixed opinions on this ranging from an increase in VAT to higher tax rates and possible increases to Capital Gains Tax. We shall be observing this carefully and informing you of any actions that may be necessary.

Bitcoin – time to take a bite?

I am sure many of you have heard more and more about Bitcoin recently; it certainly has been prominent in many conversations in the past few months. I have a number of close friends who have become Bitcoin millionaires in the past year. Sadly, I was not one of them. I have observed Bitcoin and tried to gain a greater understanding of it over the past 12 months, and even went so far as to bring it to one of our Financial planning team meetings in July last year.

As a financial planner, a rule I live by is that I would never advise a client to invest in anything that I don’t understand and this is something all of us at Chartered live by. Another rule is: if it sounds too good to be true, it probably is. So, where does this leave me when my 15 year old Son, Nic, came to me in September and asked, “Please, Dad, can I buy some Bitcoin with my savings?”

Having been curious for the past few years and living by my principles, when it came to this request I thought it was an opportunity to be open minded (given that it was not a client’s money … nor mine!).

My condition was that Nic had to put an equal amount of money in shares. So we took his R10 000 that he had in his bank account and bought R5 000 worth of Bitcoin. We chose five shares, investing R1 000 in each.

The next morning the Bitcoin was up 10%, and the shares had done very little and so it went … Two weeks later, Bitcoin was up 43% and I could see Nic thought shares were a total waste of time. I was relieved when, last week, he said that his shares had done quite well and Bitcoin was so bad: his money in Bitcoin had doubled and then halved in nine weeks, whilst his shares had slowly gone up.

I am grateful for my son to have experienced that there is no quick way to make money and returns come with patience and time.

In summary, the world of cryptocurrencies is dangerous. If you understand that you can lose your money and can afford to, then this may be something to invest in, but it is not recommended for most people.

RetiremeantTM Workshops for Chartered Wealth Solutions clients

Lastly, we enjoyed running our first RetiremeantTM Workshop at Chartered last week. About 40 people attended, 25 of which were clients and about 15 were guests. The feedback was amazing – we had clients of 15 years saying they had learnt so much. This is something we are going to do more often at Chartered, encouraging clients to bring friends to learn about RetiremeantTM the Chartered way. If you would like to attend an upcoming workshop, please email holly@charteredwealth.co.za and she will send you details.

Wishing you all a successful 2018.

Warm regards
John Campbell

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The focus, as always, is on sound advice

‘State Capture’ has emerged as the South African Word of the Year, and this should be no surprise, given the slew of revelations that have emanated from the Gupta leaks and the resultant disclosures or denials!

What is the upshot of this for the average South African investor? As I suggested in an earlier newsletter this year, the prevailing sentiment has become one of uncertainty, and this has persisted since Nenegate, the turning point in South Africa, both economically and politically. The continual exposure of a corrupt government has followed.

I am encouraged by the knowledge that this is a process that we as a country and citizens need to go through to forge a successful South Africa with leaders of integrity and people making a positive contribution. I also recognise that we are not alone – globally, we are witnessing historic shifts that add to the uncertainty, but are also evidence of a world of changing developments, perspectives and expectations.

Closer to home …

At Chartered, we have experienced a challenging, but good, year, and this largely as a result of the economic and political uncertainty. In a context of ambiguity, people (we are all emotional beings) seek assurance, and it has been our privilege to navigate our clients through these times … and this comes with its own challenges and joys.

Last week, at our fifth annual financial planner getaway, we discovered that 19 of us planners have been at Chartered for three or more years – no small reason for why we see ourselves and our clients as a family. Our focus for the getaway was to keep improving our advice to benefit our clients and ensure we continue to thrive to be the leading retirement planning business in South Africa.

At a client meeting in September, we shared investment reporting enhancements we were considering this year. We found that many clients don’t have a full understanding of the investment and product component of their retirement plan. We have learnt over the years that the deeper client understanding, the more successful our relationship.

This is why our process is a multi-faceted one. We start with a life planning meeting; it’s an opportunity for you to create a vision for your retirement. Once we know what we are planning for, the financial planning meeting follows: we assess your finances and play out a number of scenarios in search of a scenario which works for you. The outcome of this meeting is agreeing on a scenario and an investment strategy for your retirement.

The next step, as we have agreed is necessary, is to have a more detailed look at recommended products (investment vehicles), our investment process and advised solutions. We look forward to sharing this with you, our client, in your next review.

We are also refining our Retirement Plan, with a particular focus on the estate planning component. Chartered Legacy’s experience from winding up estates is guiding us in improving our planning to ensure that this process is more efficient.

Finally, a very exciting development is the opening of Chartered Tax, a business we registered four years ago following numerous requests from clients for tax advice … but we wanted just the right person to run it. Charmaine Prout has managed her own tax company for 30 years. She went through our financial planning process and decided she would love to be part of a bigger organisation. We welcome her and her team to Chartered.

We at Chartered thank all our clients for their continued support, and wish you and your families a happy festive season. Whatever it holds, 2018 can be a fulfilling year for all of us.

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Policy uncertainty should not change your long-term financial goals

Last night, a 5.2 magnitude tremor hit parts of Gauteng, the second in 24 hours. It seems a fitting reflection of the monumental economic and political shifts that have hit South Africa since Thursday last week. First tremor: cabinet reshuffle; second tremor: downgrade to junk status by ratings agency, Standard and Poor’s, from BB+ to BBB-. Moody’s has placed us on review for a downgrade. The rand has fallen 2% since the announcement of the downgrade.

Reasons for the downgrade
According to EWN, S&P’s rationale is as follows:

  1. The cabinet reshuffle reveals leadership divisions and puts policy continuity at risk
  2. Poor financial performance of government parastatals places greater strain on government
  3. Government and ANC divisions inhibit investor and business confidence and action
  4. Slow economic rate, reflected in the contraction of 0.3% in the last quarter of 2016.

Slender positives

S&P has noted the independence of the Reserve Bank and South Africa’s monetary policy flexibility as positives.
S&P has also commented that the possibility of reversing the outlook to stable exists – dependent on the strengthening of fiscal outcomes and economic growth, and the reduction of political risks.

For all investors, it is a matter of maintaining a prudent approach and level-headed attitude to our financial planning, while we await the outcomes of this pronouncement. During times of uncertainty brought on by this and other downgrades, sticking to your long-term financial plan is critical. If you need further clarity, please don’t hesitate to contact us.

Warm regards
John Campbell

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While you were sleeping …

This morning, the nation awoke to the shocking, though not wholly unexpected, news that the finance minister and his deputy, among others, had been ousted, in a ‘cabinet reshuffle’.

Reaction has been almost unanimous in its condemnation of this move: threats to impeach have been repeated, the DA is circulating a #noconfidence petition, and social media is ablaze with comments: from economic and political pundits to your average citizen (one asserting that “only thieves and scoundrels do deals at night”).

Political analyst, Daniel Silke, says that the newly appointed Finance Minister, Malusi Gigaba, will be hard pressed to reassure rating agencies, who will be unnerved by the axing of Gordhan and Jonas.

Whether a downgrade will become a reality or not, investment managers have been anticipating it for some time, given our uncertain economic environment. Portfolio managers have been making adjustments in anticipation of just such depreciation of the rand … and will continue to do so as they watch the market shifts. We have always recommended a diversified portfolio to weather such political and economic changes, and reiterate our commitment to you.

Here is a summary of the cabinet changes from EWN, for those interested in the detail.

We will see much more of the unfolding of these changes next week, following the cabinet meetings scheduled over the weekend with the new ministers, and after the markets have absorbed the impact of the President’s decision.

What is always reassuring to me is that we are all in this together. We all want a thriving economy that results from ethical and responsible leadership.

Warm regards
John Campbell

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