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Tough market to build portfolios - expert

Jan 29 2016 15:37
Carin Smith

Cape Town - "We are already having conversations about when the rand falls to R23 to the dollar," Mike Abbott, head of Sable Wealth's offshore investments told Fin24.

He said the last six months concerns among South Africans about the rand and hedging have certainly increased, especially since many expats have returned home to SA over the last five years.

One of the real risks of having rand based assets, in his view, is that, although exchange controls have been relaxed somewhat in SA, it can be changed at any time.

Sable has, for instance, experienced a increase in the number of South Africans interested in obtaining a second or alternative passport or residency.

"Policy issues now drive markets so one has to second guess and passive investment is growing globally. It is a tough market to build portfolios," he said. "In my view, the hardest for SA clients are to have depth in their international investments."

He said a lot of South Africans do know how to invest abroad, but many others do not know how to diversify these investments.

Another impact he said must be taken note of by SA investors, is the retail distribution review (RDR), which will ban commissions and introduce fee-based investment advice.

"In essence RDR involved the 'unbundling' of the investment value chain," explained Abbott. "Clients then become aware of all costs in the value chain - that of the adviser, the platform and the fund."

He said the number of advisers would like be reduce as a consequence of the implementation of RDR. Banks will likely more out of independent advice and restict their advice to high net-worth clients only, in his view. A price war between investment platforms could be another consequence as well as what he calls the "death of the financial product salesperson" and the rise of the financial planner.

Before RDR's implementation the SA market displayed transparency on adviser fees, but not on product fees, he explained.

"RDR has the noble aim to make investment fees and costs transparent, authentic and open. Good financial advisers tend to thrive in this kind of environment, while clients will know what they get," said Abbott. In his view this will likely be the case in SA.

The potential problem he foresees in SA, though, is that a big market segment will find itself without advice as the viability of providing advice to all segments will be challenged.

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investments  |  rand  |  money


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