Newsletter

2021 has felt a little bit like ‘Groundhog Day’ - where a situation in which a series of unwelcome or tedious events appear to be recurring in exactly the same way.

The past 20 months have taught us new ways to do business and interact with each other. There have been speed bumps, twists and turns, but we’ve HAD to adapt to keep the engines turning. We’ve learnt new skills and have had to repeat certain phrases again and again: “James? You’re on mute, are you there? We can’t hear you”. We have laughed and we have cried.

“It's The End Of The World As We Know It (And I Feel Fine)” Lyrics by R.E.M.

Well, it’s certainly felt like the end of the world at times this year and I’m sure I’m not alone in looking forward to putting 2021 firmly in the rear-view mirror. With that being said, this VUCA world (a trendy managerial acronym for Volatility, Uncertainty, Complexity and Ambiguity and a catchall for “Hey, it’s crazy out there!”) is something we’re tremendously grateful for. Confused? I hear you, let me explain.

In this volatile and uncertain world (and I don’t believe it will ever be anything other than a VUCA world), many people are prone to self-destructive investor behaviours - most prominently panicking during market downturns and chasing performance - which end up impeding progress and inhibiting success. While each of us tends to believe that we are not susceptible to these tendencies, most of us will acknowledge that a source of good independent advice can serve to counter them. As Nobel laureate Daniel Kahneman’s book, Thinking Fast and Slow, begins: “… it is easier to recognize other people’s mistakes than your own.” We all tend to work better with help, advice, support, correction, criticism and accountability.

This noisy world being as it is, therefore affords us an opportunity: that of being a sounding board and compass to you - of being your Trusted Financial Adviser, a privilege which we do not take for granted.

Thank you for trusting us with providing you with financial planning advice over the years. We look forward to engaging with you further in the New Year. Let’s see what 2022 holds for us all.

In the meantime, we wish you a safe and joyous holiday season.

Market News

Uncertainty will always present a challenge to investors, and assisting you to keep clear views despite short-term upsets is one of our key roles. Despite the challenges inherent in formulating forward views in the midst of pervasive uncertainty, we are pleased that developments over the past quarter favoured our views. Specifically, we have been warning investors for some time about the likelihood of inflation materially impacting investment outcomes. Recently, we have seen several central banks adopting a more hawkish stance as they come to view the inflation impetus as sustained.

Asset class views

It is important to note that we consider a range of future events that are likely to have a material impact on investment outcomes, in addition to the developments already in play. While we continually evaluate new evidence as it emerges, we are also careful not to lose sight of the bigger picture drivers that are shaping investment outcomes. Considering these, our views remain that:

• Interest rates will move higher and normalise.
• US bonds could struggle.
• Emerging markets are expected to go through an outperformance cycle, although developments in China need to be monitored closely.
• Investors can expect to experience at least one significant market sell-off.
• Investment outcomes in South Africa should be better.
• The S&P 500 could perform worse than it has over the past five years.

PSG Wealth asset class views: changes over time

We believe our current assessment remains on track, and no adjustments have been made to our asset class views. It is important to note, however, that these views are aimed at reinforcing well-considered long-term portfolio construction within the context of a well-diversified portfolio. A red indicator, for example, cautions against an overweight position for a specific client considering their unique risk profile, rather than indicating that the asset class should be avoided entirely.

Source: PSG Wealth. The table shows how our asset class views have changed over time and highlights the current high-risk areas.

Index returns as at 30 September 2021

Sources: PSG Wealth and FactSet.

Office News

Craig Rich and Francois Hugo joined our team

This year we welcomed two additional advisers to our team in Johannesburg. Having joined PSG on 1 October 2021, these new advisors bring over three decades’ worth of experience to our team.

Gauteng is currently one of PSG’s most prevalent territories. Our Melrose Arch office holds the 2020 award for Office of the Year – an affirmation of the diligence of our sizeable team and the solid reputation we have established amongst our growing client base.

Craig Rich joins the team with over a decade of industry experience, having worked across numerous, leading investment firms, including Momentum and RMI Investment Managers. He joined RMB Private Bank in 2017 as a Senior Wealth Manager and went on to be recognised as the Top Wealth Manager in 2020. Craig holds a BCom Honours degree, an MBA, as well as a Post Graduate Diploma in Estate Planning. He is also a Certified Financial Planner (CFP).

Francois Hugo has worked in the financial services industry for the past 20 years with various listed financial institutions. For the past four years, he has worked as a Senior Wealth Manager with RMB Private Bank providing holistic advice for high-net-worth individuals and families. Francois holds a BCom Honours degree in Accounting, Post Graduate Diploma in Estate Planning and is a Certified Financial Planner (CFP).

As an advice-led business, we are dedicated to helping South Africans set and meet their financial goals through objective and appropriate advice. This approach resonates strongly with the expertise of our two newest advisers, and we look forward to seeing the success of these newly established relationships.

Note from a Wealth Manager’s desk

Reminder of the opportunity to externalise monies using your Single Discretionary Allowance (SDA)and/or Foreign Investment Allowance (FIA).

There are many reasons often cited for externalising monies outside of South Africa. These include, but are not necessarily limited to the following:

• Diversification;
• Valuation;
• FX volatility; and
• Political risk.

Chief amongst these reasons is diversification. See: A Global Perspective: The Possibilities in International Equity Investing (visualcapitalist.com)

Thus, if your Portfolio still has a large ‘home bias’ then this is a friendly reminder that should you be in the fortunate position to have any excess cash and where you may not have utilised either of your R1m p.a. Single Discretionary Allowance or your R10m p.a. Foreign Investment Allowance then you might consider doing so before the 31^st December 2021 - any unutilised allowances are lost and not carried forward into 2022.

As always, it’s important to talk to your Wealth Manager to discuss the relative suitability of externalising monies as it applies to your unique investment circumstances.

Please note our office will be closed between 24 December 2021 and 3 January 2022.

We wish you a blessed festive season and a prosperous 2022.