Individualism takes centre stage in the investment world
FAnews recently attended the launch of iTransacts new product, iStructure, which provided insight into a world that is moving towards technological investing at a rapid pace.
As the world moves towards a digital age, it is clear that many aspects of life are changing. In turn, the investment industry is changing - albeit at a slightly reluctant pace – and we are starting to see the rise of exchange traded funds as an investment product of choice.
While we pinpoint the rise of ETFs to the age of technology, the popularity of the product may also be rooted in the dynamics of today’s youth, who are the investors of the future. Speaking at the launch of iTransact’s iStructure product, Dr Iraj Abedian, who sits on the board of iTransact, pointed out that youth dynamics are changing the way the world is looking at investments, and advisers need to bear this in mind if they want to remain relevant.
The great paradigm shift
Until now, the shift has not been noticeable, but it has been pertinent as younger investors break the bonds of traditional values in favour of self-actualisation. “In the past, there was a concept of strength in a group. The youth would learn knowledge from members of the group who are older than them because they were the people with the knowledge. However, this is a fading thought pattern as the youth uses technology to question the traditional pearls of wisdom which is imparted on them,” said Abedian.
This is also deeply rooted in the thinking that in the past, tribal laws and values still held strong in people where there was a significant focus on the group and the value of belonging to a group. Technology has changed this in that it has opened up the world to the youth who see that the dynamics of group membership becomes more porous. This shifts the focus onto the individual.
Dynamic individualism
While the paradigm shift from the focus on the group to a focus on the individual is a cultural mind shift, it does have a lot of bearing into the investment industry.
Traditional investment methods place value on investing clients in products where there is value in belonging to a group. This reduces the costs of the product and the mindset is that if there are greater numbers invested in a product, the more popular the product is.
This has changed significantly in that younger investors simply do not believe that there is real value in the number of investors invested in a product. According to them, this has little to no bearing in the true value of the product. They are calling for individualism, and Abedian pointed out that this needs to be embraced.
Introducing diversified investing
The problem with ETFs is that there are a number of them in the market, and without guidance of an adviser, investors may not know where to turn to find value.
Lance Solms, founder of iTransact, points out that South Africa’s investors will now have more access to the asset diversification and protection attributes of structured investment products.
iTransact has launched its new investment iStructure which will be achieving the goal that Solms has. Barclays Africa, Investec and international banks Societe Generale and BNP Paribas have put together the structured products that will be available to investors through lump-sum investments of as little as R10 000.
“We want to give retail clients exposure to structured products through different types of wrapper that are suitable to their investment objectives and financial capacities,” says Solms.
He adds that globally, structured products are recognized as an important component of a well-diversified investment strategy, offering opportunities that traditional investments, such as unit trusts, cannot offer.
“By commoditising structured products, we have made flexible investment solutions available to retail investors,” says Solms.
Encouraging flexibility
According to Solms, it is hoped that uptake of the products will exceed R1 billion year within the next year as investors recognise the variety and value they add to the investment options available in the market.
Initially, the structured products being offered by the four banks will be linked to the performance of the well known indices or stocks, such as the FSTE/JSE, Top 40 Index or technology giant Apple, but there are plans to diversify further at a later stage.
Most of the products will be for investment terms of five years, although some will have shorter terms. Fee transparency is an important feature of the new products, with all fees being decided upfront and the remaining funds being fully invested.
Editor’s Thoughts:
The concept of personalised investing should not be new to advisers, but the pace at which this adoption takes place could suggest that it is something that needs to be taken more note of. ETFs can offer value in personalised investing, and it will be interesting to see if other companies offer similar products that iTransact offer. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
