Month: March 2019

the-unkwnown

Our greatest fear: the unknown. Our greatest feat: planning for it.

Karryn-frankCan you prepare for such a significant loss in your life?

In my career as a lawyer and head of Chartered’s Legacy & Trust in-house service, I have seen how the loss of a partner or spouse can strike people to their core, and paralyse their ability to make rational decisions or take confident action.

This is no surprise, if we consider the Kubler-Ross Grief Cycle’s five stages of grief: denial, anger, bargaining, depression and finally, acceptance.

When at the first state, denial, we wonder how we will go on, even if we can go on. One emotion often associated with this stage is fear; perhaps it is the fear of being alone, or the fear of how to meet our immediate and long-term financial obligations.

While it is almost impossible fully to prepare ourselves emotionally for the death of a loved one, we can certainly make financial preparations.  Our ongoing experience with the winding up of estates has provided us with valuable insight into how best to prepare financially for this transition. We have also added to our service offerings to assist our clients in this process.

Practical considerations

The issuing of the Letters of Executorship to be issued in an estate can take up to six weeks (often longer!).  Very little can be done on an estate until the Executor has been appointed. Even thereafter, it takes some time to open the estate late bank account and for assets to be realised to provide the estate with liquidity. All the while, expenses continue to run. Depending on what stage of life you are in, there may be bond repayments looming, school fees to be paid and maintenance obligations in terms of a divorce order.  Is there a way to plan for this?

When a person passes away, their bank account should not be accessed.  There are no joint bank accounts in South Africa, so even if you have signing powers on your partner’s account, you will not have access to these funds once he or she has passed away. This often leads to worrying about where funds will come from.  It is paramount for each person to have a bank account in their own name with sufficient funds in it to be able to carry the immediate expenses until the estate is liquid. If the surviving partner has their own liquid assets in their name which they can access in the short term, this is an enormous help.

A simple estate can take as long as a year to wind up. While funds can be accessed in an estate during this time, there are some assets that do not form part of an estate and which are readily available.  We refer to these as “deemed assets”.  These assets are dealt with outside the estate and are usually beneficiary nominated.  They can be accessed within weeks of a person passing away. Examples of these assets include life policies, living annuities and retirement annuities.  It is important, however, to distinguish which are retirements funds among these assets. Although retirement funds fall outside the estate and are beneficiary nominated, they are subject to the discretion of the Trustees of the fund. There will always be an investigation by the Trustees as to who was dependent on the deceased and they will award the funds accordingly … and this may not always be in line with the beneficiary nomination.  This can cause lengthy delays in payment of the funds.

At Chartered Legacy & Trust, we offer our clients an Estate Plan which helps to prepare you financially for the impact death will have on your estate and what taxes will become payable. The plan will highlight whether there is a liquidity shortfall in your estate to meet the financial obligations and, if so, which assets will need to be sold. This is an important exercise and one which we encourage all our clients to undertake.  As part of our Wills offering, we are now also assisting clients with the preparation of a Legacy Folder. The purpose of folder is that all the documents your Executor will need when winding up your estate are kept together and are up-to-date.  This will save your partner a huge amount of stress at a very emotional time. Having an up-to-date Legacy Folder will assist when negotiating your Executor’s fee.

Our aim at Chartered is to relieve you of any financial fears or concerns you may have after losing your spouse or partner. By planning and having a good understanding of the estate process, you can alleviate worry for your loved ones left behind.  We are here to assist so life can continue with as little financial disruption as possible.

The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown.                                                            H P Lovecraft

Kerryn Franck is the Director of Chartered Legacy & Trust.  She and her team work to create peace of mind for their clients by creating Estate Plans that accurately reflect their clients’ wishes.

savings

Saving tips – what to look out for in your budget

Craig_Turton

You don’t save what’s left after spending. You spend what’s left after saving. Warren Buffet

While there may be a degree of uncertainty – both globally and locally – regarding the political, economic and social landscape, we as South Africans can empower ourselves through awareness and action to ensure our money still meets our life goals.

With fuel price increases, electricity hikes, medical aid inflation, food inflation against the backdrop of a slow economy, our businesses might not be able to give the above inflationary increases as we have seen in the past. Times are tough for all of us – we can either become despairing and complainers, or we can adjust our thinking and tweak our own financial plans.

Over the years, I have seen three basic tactics by which clients have reached financial freedom:

  1. their budget
  2. setting a lifestyle ceiling
  3. settling debt as quickly as possible

This article focuses on the first option: budgeting.

The cost of living, the desire to have the best and conspicuous consumerism make budgeting one of the biggest challenges in a financial plan … but it is also the area over which we have the most control.

Here are my proven ways to make your budget work well.

  • Decide how much you want to save every month, and build your budget from there – not the other way around! Clients that I have seen reach financial freedom have managed to “pay themselves first” through saving and investing for the future.

30% of your net salary should be going towards savings. That leaves you with 70% to spend. This 30% includes your Pension and Provident Fund contributions. Thereafter, look at settling your debt, with your credit cards first and then your home loans. Then, you can spend what is left.

  • Separate your needs from your wants. Try to turn off the message of adverts and marketing companies, who want you to believe you need their products. My challenge is, for just one month, when you walk past store windows, ask yourself: do I want this or do I need it? If is not a need, walk away.
  • Annualise your expenses – convert monthly amounts (that may seem small) to yearly amounts, which gives you a more significant figure. Then ask:
  1. Do I actually need this?
  2. Can I rather pay upfront for this and save?
  3. Can I spend less on this?
  • Once you have figured out that you could save more and pay yourself more, there are different investment vehicles you could look at investing in. A popular choice is a Tax-free Savings Account – a long-term savings vehicle not to be confused with saving money in a bank account. Money in the bank is for short-term savings and emergencies. The benefits of a TFSA are: 
  • Investment remains liquid and accessible at all times
  • All capital growth, interest and dividends are tax free
  • Any withdrawals made will not trigger capital gains tax
  • Great way to have exposure to equities and offshore investments

When investing or saving in this structure, consider how it is invested in the vehicle. You can choose many different options, from cash portfolios to equity portfolios. Chat to your financial planner as your savings plan still needs to form part of a holistic financial portfolio.

Good luck with your budgeting! Please share with us your success stories or ideas.

Craig Turton is a Certified Financial Planner® and Wealth Creation Specialist at Chartered Wealth Solutions. He is committed to helping young people build their wealth through sound financial planning and healthy money habits. 

SA-cws

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

Jeremy Gardiner of Investec Assest Management for Chartered Wealth Solutions

Signs of Spring?

Jeremy Gardiner of Investec Assest Management

A collapsing currency and equity market combined with a rocketing petrol price didn’t help

The point of ‘capitulation’ in economic cycle theory is generally seen as the bottom in any cycle, the point just before ‘things start to improve’. It is unfortunate, and indeed sadly, also generally the point at which most equity investors finally give up and sell, when stocks are at their cheapest, driven entirely by sentiment and emotion rather than investment fundamentals. The investment industry must be one of the few where people are inclined to sell when their asset is cheap, and conversely, when prices rocket, they buy more.

Anecdotally and deviating slightly from economics, the fourth quarter of 2018 for me felt like the point at which South Africans reached their ‘capitulation point’ with our country. Of course, a collapsing currency and equity market combined with a rocketing petrol price didn’t help. The level of political anger and noise seemed unprecedented: everyone was fighting with everyone and with it came a spike in talk about emigration and about having a ‘Plan B’. South Africans are angry, and many seem to have reached the point of ‘giving up’ on Brand SA.

So does that mean then, that things are about to improve?

The point of ‘capitulation’ in economic cycle theory is generally seen as the bottom in any cycle, the point just before ‘things start to improve’. It is unfortunate, and indeed sadly, also generally the point at which most equity investors finally give up and sell, when stocks are at their cheapest, driven entirely by sentiment and emotion rather than investment fundamentals. The investment industry must be one of the few where people are inclined to sell when their asset is cheap, and conversely, when prices rocket, they buy more.

Well, things do feel slightly better this year. It could simply be down to a good holiday and some sunshine. Also, don’t underestimate the impact of rising markets and a strengthening currency in terms of improving the mood. And conversely, don’t underestimate the negative impact of load shedding on ‘darkening’ the mood, so hopefully it doesn’t last.

While one doesn’t want to herald a ‘false dawn’, there are a number of factors that could work in our favour to certainly numb the pain, and perhaps even lighten the mood considerably. Could investors finally be rewarded for the five years of flat returns they’ve had to endure?

First of all, 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 coming 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

And while the various commissions currently playing themselves out are both fascinating and horrifying at the same time, be very thankful that they’re happening. They certainly wouldn’t be if the Zuma Dynasty were still in control. Hard as they are to watch, as they brutally expose the corruption ‘free for all’ that existed during the Zuma presidency, it is a very necessary process. If we are to right the wrongs of the past, it is important that we know exactly who and when and how everything was done.

Secondly, Donald Trump is in trouble. His government shutdown has – according to polls – plunged his popularity to 34%. He’s got elections in just over 18 months’ time, and stock markets are soggy. He is therefore being much friendlier to the Chinese this year – a reduction of the trade war, and even a discontinuation, would be very positive for emerging markets, including SA.

Don’t underestimate the impact of rising markets and a strengthening currency in terms of improving the mood.

The world is ‘slowing, but still growing’ seems to be the common theme out of Davos this year. The US and China should both remain firm and if the Chinese stimulate more, which they may well, then emerging markets, including SA, will see stronger growth.

‘Slowing, but growing’ means we shouldn’t see unexpected US rate hikes. None are forecast for this year, and some, including previous Fed Chair Janet Yellen, are signalling this may be the peak of the tightening cycle. In addition, a temporary reprieve from balance sheet normalisation should mean the US dollar has probably peaked. That, together with stable US interest rates, are both favourable winds for emerging markets like SA.

Across the pond, Britain will most likely stumble into some sort of deal, and then the world can move on from the noise that is Brexit. While there is an element of schadenfreude in seeing Britain or the US also suffering self-induced pain and political turmoil, we always have to remember that any significant instability in the developed world inevitably sees us (read emerging markets) being punished as well.

So, all of the above, coupled with the fact that emerging market equities, bonds and currencies are reasonably valued, have seen investors starting to shift back towards higher-yielding emerging market assets, including SA.

Some economic tailwinds (as opposed to the headwinds we faced last year), is exactly what Cyril Ramaphosa needs. Add to that a strong mandate from successful elections (and certainly most polls seem to be pointing that way), and 2019 should not only see South Africa lifting from the muddy waters of corruption in which the ‘Zuma lost years’ left us stranded, but investors hopefully finally being rewarded for their patience.

A few photographs of clients attending Jeremy’s presentation:

See more images on our the Retire Successfully Facebook page and remember to join our closed client group.

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