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Reporting from the Helm June 2022

I thoroughly enjoyed my recent trip to the US. It was incredible to walk the streets of New York and Chicago, soaking up the energy of these great cities. The purpose of my trip was to attend the Morningstar conference in Chicago. For those who are unaware, a few years ago, we engaged with Morningstar as we felt it was time to look beyond the borders of South Africa for a new investment consulting partner, and potentially remove the home bias in our global investments. This was on the back of a growing number of our clients’ assets being invested outside South Africa. Morningstar has had offices in SA for the better part of the last ten years, and we know their local team well, so it was fantastic meeting the global team in person. It was both enlightening and comforting to experience the scale and magnitude of their global operation. During the three-day conference, we attended fascinating asset manager presentations from many of the largest global asset managers, including Blackrock, Vanguard, Fidelity and UBS. All of them advise on assets well in excess of the entire South African savings industry.

There were a few takeaways from my time in the US. Firstly, I left with great confidence that we have selected a substantial global investment house to partner with us as we launch our new investment offering in October this year. I mentioned on our road shows that WealthStrat has formulated solutions for us whereby we can consolidate our clients’ investments into lower-cost and more tax-efficient investments. This will ensure your investments stay future fit with minimal capital gains tax liabilities while enjoying the benefit of Morningstar managing the asset allocation and fund manager selection.

My other observation is that the world is in a difficult place, particularly in the US, where the younger working generation has never really experienced inflation. There were adverts for jobs in every other shop and restaurant window. Yet, after chatting to the management, I learnt that people weren’t willing to work for the basic wage of $7.25ph, which is R116 an hour. Restaurants have had to increase food prices to attract staff to pay them what they consider fair pay. An average restaurant charges $8 for a beer, excluding 18% gratuity and 10.2% tax, so a beer costs R166. This is a simple example of where increasing inflation comes into play. While the US has always had an element of excess, this no longer seems to be realistic or sustainable. The markets are now factoring in higher inflation and increasing interest rates.

All in all, it was wonderful to travel again, but it’s always great to be home. South Africa has its challenges, but we are not alone, and it’s hard to believe that the US inflation is now higher than SA.

On the home front, I am pleased to report that finally, we are changing our phone system to a new provider, we hope this resolves our phone problems we have all experienced. Thank you for your tolerance and patience.

Warm regards,