Time to help clients get wise to new offshore realities – BJM

Invest time in client re-education on offshore investment opportunities. It’s business-enhancing and in the long-term best interests of your customer-base.

The practice-building tip comes from BJM Private Clients Services, an asset manager and financial planner with dedicated focus on high net worth individuals, families and trusts.

“There are indications in both the institutional and retail sector that full advantage has yet to be taken of the new foreign exchange dispensation,” says Grant Rossiter, Cape Town-based regional manager of BJM.

“New regulations enable R4 million per person per year to be placed offshore. This is not a once-in-a-lifetime lump sum, but an annually recurring opportunity.

“In business terms, this means advisers can add value with an international diversification review on an on-going basis. Time invested in client education or re-education on offshore realities is time well spent as new rules create potential for continual adjustments and continual advice.”

BJM says many clients remain ‘offshore-averse’ after disappointments in 1997 when forex controls were relaxed just before the Dow Jones bull-run came to an end and in 2000-2001 when the allocation went up to R750 000. Bets against the rand were often placed as the unit sank to R13.26 versus the US dollar, but a strong rebound soon resulted in losses.

Clients have done well by sticking closer to home, says Rossiter. Last year, the JSE’s total annual return was just under 19% while listed property achieved gains of 29.6%.

This may have induced them to cold-shoulder the opportunities created when National Treasury made its December announcement, lifting exchange control limits to unprecedented levels.

Even institutions seem slow to move. They may now invest a maximum of 20% of assets offshore, but there appears to be no rush to “push the new envelope”, says Rossiter.

“We know an international diversification review can be a prickly subject for clients with long memories,” notes Rossiter. “But it may be beneficial to grasp the nettle as we have seen fundamental changes in developed, emerging and frontier markets in recent years.

“Clients need to be alerted to these shifts, now and in later years. Current rand strength may also create a timing opportunity.

“We believe a review could prove performance-enhancing … for both the adviser’s business and the client.”