Showing value in troubled times
Viresh Maharaj, COO of Sanlam Employee Benefits Client Solutions
Is the current savings environment the most volatile environment in recent history, is the focus on cryptocurrencies a good thing, and how will the political situation in South Africa affect the country’s savings environment going forward?
These were some of the topics discussed at a recent media roundtable that was hosted by Sanlam Employee Benefits. The discussions were vigorous, and the Sanlam representatives pulled no punches when discussing certain topics.
A difficult savings environment
The first issue that was discussed was the state of the economic environment that investors find themselves in. Is this the most volatile environment in recent history?
“I think that the current environment is very tough for investors and goes beyond savings,” said Dawie de Villiers – CEO of Sanlam Employee Benefits. He added that there is increased pressure felt on all sides and that it is being felt by the retail and institutional sides.
“Investors are feeling the pinch when it comes to money and the psyche behind investing. What we are seeing now is that clients are starting to look at the environment and saying: well if I am not going to be ok in retirement, there is little point in making sacrifices. This is a significant problem when it comes to investing as clients will only invest if there are going to be positive outcomes, and this positivity is really hard to come by,” said De Villiers.
Forced introspection
On the institutional side, one of the unintended consequences of the volatile investment environment is that it forces companies, to sit down and become introspective of the way that they go about business. De Villiers pointed out that fund managers are sitting and asking how they can decrease costs so that deductions will decrease.
“Companies are also realising that they are in a war for talent in the industry because skills are scarce. Because of this, companies are adopting the tactic of looking after employees in the retirement space in order to retain talent,” said De Villiers.
The virtual world
Investors are becoming desperate to see value for the hard-earned money that they are saving towards retirement.
Fund managers are struggling to find alpha, and there are increasing instances of clients who are turning towards self-investing as a way to find growth.
One of these methods is crypto currencies. Every day, there are reports in about the growth of Bitcoin and Ethereum; but are these the investment models of the future or is it just investment bubbles?
“I think that cryptocurrencies are very much in their infancies and should not be considered suitable investment vehicles because the investor is basically taking a gamble on where the currency will go,” said Viresh Maharaj, COO of Sanlam Employee Benefits Client Solutions.
This is not the first time that this concern has been raised in a public forum. There are serious concerns about the sustainability of Bitcoin which is largely being driven by the lack of regulation that should govern it.
And it is not only Bitcoin that is raising concerns, Ethereum is also turning heads for the wrong reasons. There are reports that over $150 million in investments are being locked by Ethereum with little of chance of investors recovering this. There are also a lot of reports pointing to funds being stolen from Ethereum after being hacked.
So, while there was a general foreboding when it came to cryptocurriencies, there was a general agreement that Blockchain (the underlying technology that drives cryptocurrencies) will be a significant industry changer going forward.
Political worries
Since Finance Minister Malusi Gigaba delivered his first Medium Term Budget Policy Statement, we have been further downgraded.
De Villiers feels that, there will not be a major shock to the market.
“The price of the downgrade is already priced into the market. However, that is not to say that there will not be a shock. If we focus on this from a company point of view, international investments into South Africa will slow down, so funding may be hard to come by. Companies will need to relook at the way that they operate in order to reduce costs,” said De Villiers.
He added that there is a lot of positivity in the market regarding the result of the African National Congress’s December Elective Conference which will appoint the new leader of the party and the country assuming that the ANC will win the 2019 general elections.
South Africa has seen its fair share of political instability over the past two years. This has been factored into economic outlooks and predictions. However, while we are used to it, international investors are not.
Editor’s Thoughts:
If anything, challenging times are the times where advisers show their true worth in the invaluable advice that they give clients. How are you showing your value? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
