The over­looked value of tak­ing suf­fi­cient risk

In­vest­ments must be tai­lored to peo­ple’s cir­cum­stances and in­di­vid­ual as­pi­ra­tions

Financial Mail - Investors Monthly - - Special Report: Purple Group -

Client en­gage­ment is rarely found in the world of in­vest­ing. Sure, in­vest­ment com­pa­nies want your money, but not nec­es­sar­ily your in­ter­est. And just how in­vested are they in the well­be­ing and un­der­stand­ing of your risk pro­file, port­fo­lio and per­sonal in­vest­ment goals?

This is a ques­tion Charles Sav­age, CEO of Pur­ple Group, be­lieves re­quires an­swer­ing. It stems from his own ex­pe­ri­ence. “I don’t be­lieve the in­vest­ment in­dus­try has played fair for a long time, and while this is chang­ing thanks to tech­nol­ogy, com­pe­ti­tion and new reg­u­la­tion, it is my view that there has been a dis­pro­por­tion­ate shar­ing of wealth cre­ation that has done more to en­rich the as­set man­agers and their share­hold­ers than the clients they serve.”

He rec­ol­lects his own ex­pe­ri­ence of be­ing ad­vised in his mid-20s to adopt a mod­er­ate risk ap­proach, only to dis­cover a decade later that this had re­sulted in his port­fo­lio un­der­per­form­ing in­fla­tion. This “lost decade”, he says, is not an un­com­mon oc­cur­rence for the ma­jor­ity of South African in­vestors hop­ing to build a safe re­tire­ment.

“Too many South Africans waste two, even three decades, then get to re­tire­ment and are forced to take more risk. Un­for­tu­nately the thing that dis­si­pates risk most ef­fec­tively is time, and what you’ve lost most of when you’re 60 is time.”

The les­son from his per­sonal ex­pe­ri­ence has in­formed his phi­los­o­phy to wealth cre­ation, which lies at the heart of the Pur­ple Group’s ap­proach.

A com­par­a­tive new­comer to the mar­ket, the group has grown con­sid­er­ably from Mark Barnes’ in­vest­ment com­pany, JSE-listed Pur­ple Cap­i­tal.

The group has un­der­gone a meta­mor­pho­sis over the past 10 years that cul­mi­nated just over a year ago in a name change to Pur­ple Group.

This trans­for­ma­tion has been marked by the ac­qui­si­tion of the online trad­ing plat­form in 2007 and the cre­ation of Em­peror As­set Man­age­ment and GT Pri­vate Broking. The most re­cent ad­di­tion to the sta­ble is EasyE­quities, a plat­form cre­ated to em­power all in­vestors to take charge of their own fi­nan­cial well­be­ing.

Sav­age says the com­po­si­tion of the group po­si­tions it to cater for the broad mar­ket — from the novice in­vestor through to ac­tive de­riv­a­tives traders, with its pri­vate broking and as­set man­age­ment busi­nesses pro­vid­ing more tra­di­tional in­vestor ser­vices.

“The pe­riod from 2008 to 2010 was about sta­bil­is­ing the ship, then through to this year we have fo­cused on build­ing a dif­fer­en­ti­ated re­tail fi­nan­cial ser­vices group fo­cus­ing on pro­vid­ing ser­vices to the mass af­flu­ent mar­ket,” Sav­age says.

He ex­plains that this ter­mi­nol­ogy recog­nises peo­ple’s de­sire to ac­cu­mu­late wealth, ir­re­spec­tive of their age or in­come group. “It could be a per­son who is 18 or 80, but still try­ing to ac­cu­mu­late wealth. A key at­tribute they have is the ca­pac­ity to take risk,” he says.

He con­sid­ers this ap­pre­ci­a­tion of an in­di­vid­ual’s unique cir­cum­stances and risk ap­petite to be one of Pur­ple Group’s big dif­fer­en­tia­tors, as its var­i­ous ser­vices en­able in­vestors to tai­lor their in­vest­ments based on their par­tic­u­lar cir­cum­stances.

“In many in­stances, South Africans have been sold less risk than they re­quire, and worse than that, less than their risk pro­file can ab­sorb,” he says.

And Gary van Dyk, Pur­ple Group’s chief fi­nan­cial of­fi­cer, adds: “The risk that comes with not tak­ing enough in­vest­ment risk is the risk of re­tir­ing with too lit­tle money.”

Pur­ple Group CEO Charles Sav­age.

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