Big offshore opportunities for advisers – Franklin Templeton
Significant easing of exchange controls creates new business opportunities for financial advisers, according to Franklin Templeton Investments, South Africa.
New Reserve Bank rules allow South Africans to invest up to R4 million per person per year offshore. The new dispensation comes during a period of prolonged rand strength, creating a timing opportunity should the rand lose ground in the year ahead.
Franklin Templeton Investments South Africa, reports an increase in offshore business, with business volumes positioned for long-term growth.
The firm believes new South African Reserve Bank rules could prompt a wide-ranging reappraisal of offshore diversification by retail investors – good news for advisers looking to develop a strong offshore product offering.
The local team of analysts and investment professionals is close to investor sentiment on international markets as it focuses exclusively on the parent company’s extensive suite of offshore funds.
Michael King, Director: Sales (Africa), notes: “As advice professionals are aware, many retail investors remain cautious about offshore exposure following past disappointments.
“However, the old reticence has begun to recede. Now we’ve witnessed a major relaxation of foreign exchange controls by the Reserve Bank, de-facto acceptance that offshore diversification is prudent.
“This in itself is sufficient to prompt an offshore rethink by many members of the investing public.”
Franklin Templeton views the Reserve Bank announcement as a tipping point with important implications for advisers who are concerned about the narrow focus of many client portfolios.
King says a new client mindset is becoming apparent and believes clients are increasingly receptive to the business case for offshore exposure.
“Many investors now acknowledge the inherent risk of total commitment to a local market – the JSE – representing less than 1% of global market capitalisation,” he adds.
“At the same time, we see growing interest in Asian equities, specifically China and Asian growth funds.
“Another trend is toward offshore fixed-income products. Here, the investors fall into two categories – those looking for a prudent option supported by offshore diversification and those who have serious concerns about a sudden market correction.”
King admits the investor rethink has only recently begun and that advisers will have to engage in continued market education.
“After a period of neglect,” he notes, “offshore products have become a potential growth area. Rand strength underlines the opportunity, whether in Asia, the BRIC countries, the USA or Europe. But this is much more than a currency play. It’s a strategic opportunity – for advisers as well as their clients.”
