What you need to know about obtaining personal financial advice. Update from the Principal Officer. MEMBER NEWSLETTER October 2014

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1 MEMBER NEWSLETTER October 2014 Update from the Principal Officer Dear members It was pleasing to see from the member survey responses that many members are enjoying the Fund s communication and finding the information helpful. One of the main requests was for assistance in respect of personal financial planning advice. This edition of The NestEgg provides you with all you need to know about appointing a financial adviser. We have also noticed the drastic steps members are taking to deal with their indebtedness and we offer some guidance on whom to contact when in financial difficulties. As usual we also provide an update on retirement reform (specifically T-Day) as well as giving you an update on the Fund s investment performance. Thank you to everyone who took part in the Fund s survey during July. The response was overwhelming and the lucky winners will be receiving their Wimpy vouchers very shortly! Kind regards Lynn van der Merwe PAGE 1 What you need to know about obtaining personal financial advice We all have financial goals in life. The trick is understanding these goals, knowing when you will need to use your money and what you will be using it for. This process is called financial planning and a qualified financial planner or financial adviser can assist you in developing a plan of action, with specific steps you will need to take to achieve those goals. Generally, financial advisers consult on a range of financial matters to assist you in making informed decisions about your financial situation at the various stages of your life, so that you may achieve your financial goals. This article aims to help you understand what the financial planning process is all about and what your financial adviser should be doing to assist you.

2 The financial planning process The following are the six steps in the financial planning process which your financial adviser should go through with you: Step 1: Establishing and defining a professional relationship At the outset, your financial adviser should clearly document the services to be provided to you and explain both his/her and your responsibilities. This includes explaining how he/ she will be paid and by whom, and you should feel free to negotiate the fee. You and your financial adviser should agree on how long the professional relationship should last and on how decisions will be made. Step 2: Gathering data, including goals Your financial adviser should ask for all the relevant information about your financial situation and, if relevant, how you feel about investment risk. Your personal and financial goals should be agreed upon so that you both understand how long it may take before the results are achieved. This information must be obtained before the adviser begins the process of giving advice. Step 3: Analysing and evaluating your financial status Your financial adviser should analyse your information to assess your current situation and determine what you must do to meet your goals, taking account of the services you have agreed to. 1 4 Six steps in the financial planning process Step 4: Developing and presenting financial planning recommendations and/or alternatives Your financial adviser should offer financial planning recommendations that address your goals, based on the information you provide, and should discuss the recommendations with you to help you understand them so that you can make informed decisions. Should you have concerns, these should be noted and the recommendations revised, if necessary. Step 5: Implementing the financial planning recommendations Your financial adviser and you should agree on how the recommendations will be carried out. Your financial adviser may carry out the recommendations or serve as your coach, co-ordinating the whole process with you and other professionals such as attorneys, stockbrokers or insurers. Step 6: Monitoring the financial planning recommendations Your financial adviser and you should agree on who will monitor your progress towards your goals. If your financial adviser is in charge of the process, he/she should report to you periodically to review your situation and adjust the recommendations, if necessary, as your life changes. Tips on seeking financial advice Look for a financial adviser who is a Certified Financial Planner (CFP ). They are licensed and regulated by the Financial Services Board (FSB), and have to undergo continuous professional development. Log on to the website of the FSB at to check whether the financial adviser that you wish to engage is licensed. Click on the Financial Service Providers link and make sure you have either the name of the Financial Service Provider (FSP) of which the adviser is a representative or the registered licence number. Once the FSP name appears, click on Details and then Representatives and type in the name or surname of the adviser. The screen will display the products which the adviser is licensed to provide advice on. Consider the financial adviser s pay structure. A financial adviser who earns money based on commission rather than a flat, hourly rate or project fee, could have an incentive to steer one in a particular direction. Be aware of whether the financial adviser you appoint is backed by a large corporation or from a small private business. Read the code of ethics that your financial adviser adheres to. Look for the word fiduciary and language that requires the adviser to look after your best interests. PAGE 2

3 Questions you could ask a prospective financial adviser: What are your qualifications? Do you belong to a professional body if yes, which one? Are you a CFP professional? How many years experience do you have giving financial advice? How do you expect to be paid? Do you have any references? Are you a licensed financial services provider and what is your licence number? What can I do if I am dissatisfied with your services? Reporting misconduct / bad advice from a financial adviser You are able to report misconduct by a financial adviser, by lodging a claim with the FAIS Ombud. The FAIS Ombud s services are free and accessible to all. The FAIS Ombud s role is to resolve disputes between financial services providers and their clients. To lodge a complaint, find the complaints form on the FAIS Ombud website ( or call the FAIS Ombud on (012) Watch out for unscrupulous lending practices! Given the financial pressure which many people are experiencing these days, a lot of people are taking drastic measures to stay afloat. There have been a number of cases where members are obtaining loans from money lending companies as bridging finance, with a view to paying back these loans once their withdrawal benefits are received. These members end up paying high fees and interest, which makes them a lot worse off in the end. The National Credit Act recommends that anyone who has financial difficulties should contact the offices of the National Credit Regulator, who will be able to put them in touch with a registered debt councillor who can help them apply to have their debts restructured if they have taken on too much debt. In such cases the debt councillor will recommend to a Magistrate s Court that the person s debt be restructured to suit them and their creditors, who will be advised accordingly. This will assist in paying off huge debt in a structured manner. Take control of your finances and embrace 2014 with the determination to be the financially savvy person you are destined to be! PAGE 3

4 INDUSTRY UPDATE ON RETIREMENT REFORM In the last edition of the Nest Egg, we informed you that the Taxation Laws Amendment Act, 2013 was signed in to law in December 2013 and would bring about major changes in the retirement fund industry from 1 March 2015 (referred to as T-Day ). These changes would have a direct impact on the tax treatment of your retirement fund contributions and benefits. However, the government has agreed to postpone the implementation of this Act, which was originally set for 1 March 2015, for one year to allow for further discussion at the National Economic Development and Labour Council (NEDLAC). Should NEDLAC not be in agreement by the end of June 2015, the T-Day changes may be postponed for an additional year to 1 March This comes after the labour constituency at NEDLAC (COSATU) requested that the implementation of the Act be postponed pending the finalisation of a comprehensive social security policy. These changes are expected to be incorporated in the revised Taxation Laws Amendment Bill, 2014 that is being redrafted for presentation to Parliament during October Once the revised Taxation Laws Amendment Bill, 2014 is released and approved by Parliament the Fund will provide detailed feedback to members. PAGE 4

5 INVESTMENT PERFORMANCE REPORT QUARTER 3 OF 2014 MARKET OVERVIEW Globally, the US is the only economy that is doing well. China continues to grapple with the consequences of too much debt in an economy that is very dependent on investment. Europe continues to stagnate - a situation aggravated by the stand-off with Russia over the Ukraine and weaker demand in China for European exports. Falling commodity prices are having an increasingly adverse impact on South Africa. The economy remains trapped in stagflation (a condition of slow growth and high inflation). This makes it difficult to hike interest rates further. In August the inflation rate was 6.4% and the Reserve Bank did not change interest rates at its September meeting. However, it has warned that, given current inflation levels, interest rates can be regarded as being too low. Any significant increase in the inflation rate will require an interest rate response. Reserve Bank Governor Gill Marcus has stepped down at the end of her five-year term and deputy governor Lesetja Kganyago will assume the governor position next month. PERFORMANCE SUMMARY AS AT 30 SEPTEMBER 2014 PORTFOLIO / INDEX QUARTER YTD 1 YEAR 3 YEAR 5 YEAR DEC 2000 Growth 0.58% 10.54% 15.73% 17.09% 14.27% 15.37% Balanced 0.72% 9.10% 13.07% 14.28% 12.25% 12.45% Click on the links below to access the following additional information: Investment Managers Outlook and Strategy Update Website Investment Page Stable 1.25% 6.91% 9.57% 10.50% 9.40% 9.27% Money Market 1.53% 4.36% 5.74% 5.58% 6.05% 7.61% CPI 1.46% 5.60% 6.20% 5.87% 5.29% 5.89% HISTORICAL PERFORMANCE OF THE FUND 700% 600% 500% 400% 300% Growth Balanced Stable Money Market CPI 200% 100% 0% PAGE 5 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

6 ASSET ALLOCATION PER PORTFOLIO Local Shares International Local Bonds Local Property Local Cash 50% 22% 23% 5% 15% 25% 43% 10% 40% 5% 9% 35% 18% 100% Growth Balanced Stable Money Market BRITISH AMERICAN TOBACCO PLC (9.19%) TOP TEN DOMESTIC SHAREHOLDINGS 6 NASPERS LIMITED (3.62%) SASOL LIMITED (8.06%) STANDARD BANK GROUP LIMITED (5.80%) SABMILLER PLC (4.79%) ANGLO AMERICAN PLC (3.95%) REMGRO LIMITED (3.02%) MTN GROUP LIMITED (2.70%) CAMPAGNIE FINANCIERE RICHMONT SA (2.49%) FIRST RAND LIMITED (2.24%) MANAGER PERFORMANCE (GROSS RETURNS) AS AT 30 SEPTEMBER 2014 The portfolio managers who have been selected to manage the underlying asset classes have strict mandates and performance targets that are monitored regularly. The table below reflects the annualised performance for each asset class and each manager, except the quarterly returns, which represent the actual performance. ASSET CLASS MANAGER DATE APPOINTED QUARTER 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION SHARES Allan Gray 01/10/ % 21.80% 21.75% 18.79% 23.50% Coronation 01/02/ % 13.79% 25.55% 21.28% 15.54% Foord 01/07/ % 19.26% N/A N/A 26.11% FTSE/JSE Free Float Index (ALSI) -2.13% 15.44% 22.18% 18.01% BONDS Coronation 01/08/ % 7.13% 10.33% n/a 10.16% Old Mutual 01/12/ % 5.60% 9.32% 10.29% 11.52% BEASSA All Bond Index (ALBI) 2.21% 5.79% 8.48% 9.29% PROPERTY Sesfikile 01/08/ SA Listed Property Index CASH Investec 01/12/ % 6.04% 5.88% 6.35% 8.80% Sanlam 01/12/ % 6.09% 6.00% 6.38% 8.70% STeFI Composite Index 1.50% 5.64% 5.49% 5.92% INTERNATIONAL Allan Gray 01/10/ % 13.90% 23.37% 13.54% 10.27% Foord 01/07/ % 13.10% n/a n/a 17.68% Investec 01/02/ % 19.58% 23.02% 16.24% 9.87% Morgan Stanley Capital International All Country World Share Index (MSCI) 4.02% 26.64% 32.85% 20.75% FUND CONTACT DETAILS Tel Fax retfund@media24.com Website PAGE 6