An in­vi­ta­tion to a CFP to man­age my as­sets

Exam fail­ure

Finweek English Edition - - MONEY CLINIC -

I’D HOPE­LESSLY FAIL the cur­rent stan­dard exam to be­come a cer­ti­fied fi­nan­cial plan­ner (CFP). I don’t un­der­stand or even ap­ply one of the stan­dard con­cepts – or have they al­ready be­come clichés? – those peo­ple are so fond of us­ing. In the soft news sto­ries in last week­end’s Sake24 news­pa­pers there were a lot of them again. “The core of good as­set man­age­ment is the cor­rect as­set al­lo­ca­tion to the three as­set classes: shares, prop­erty and cash” is the re­frain. An­other stan­dard call is it’s es­sen­tial to have at least 30% of your port­fo­lio in off­shore as­sets in or­der to pro­tect your­self against sick South Africa and its cur­rency.

With my few pen­nies, which I still man­age my­self, I don’t ap­ply any of those. And when I some­times make a sug­ges­tion to one or two friends – note: sug­ges­tion, not ad­vice, be­cause that would be il­le­gal – I’ve also never laid one of those cor­ner­stones.

Let’s start with the in­ter­na­tional or for­eign in­vest­ments, or pro­tec­tion against the weak rand. Per­son­ally, I’ve never in­vested a cent over­seas. It wasn’t nec­es­sary for me to ap­ply for amnesty a few years ago, as 35 000 oth­ers did, for the old “in­no­cent trick­ery” of the past. Ap­par­ently, there will be an­other op­por­tu­nity soon to ap­ply for amnesty. If you’re one of those who have to do so, you won’t get any sym­pa­thy from me. Over the past 10 years the rand has been a strong cur­rency and things have gone con­sis­tently well with SA’s econ­omy. The Mor­gan Stan­ley Cap­i­tal In­ter­na­tional in­dex (MSCI) – I hope your as­set man­ager has at least beaten the re­turn on that – has pro­vided in­vestors with a neg­a­tive re­turn of 2,3%/ year in US dol­lars over the past 10 years. Ac­cord­ing to the same MSCI source, the re­turn on SA shares, also in US dol­lars, was 10,6%/year over the same 10 years. I’m not bright enough to cal­cu­late how much dam­age a neg­a­tive re­turn of 2,3%/ year has done to your as­sets ver­sus a pos­i­tive 10,6%/year. That’s a com­pli­cated com­pound re­turn and if you didn’t even know it’s good prac­tice to pro­tect 30% of your as­sets against the un­cer­tain new pol­i­tics in SA you’ll cer­tainly be un­able to work that out.

Re­cently, a fairly re­spected re­tired as­set man­ager told me he’s now de­cided to take his per­sonal pain and bring his over­seas money – the bit that’s left – back here.

An­other un­cer­tainty that will make me fail the exam is about what the plan­ners mean with the cor­rect al­lo­ca­tion be­tween the dif­fer­ent as­set classes: shares, prop­erty and cash. My ques­tion is how a re­tired or semi-re­tired per­son is sup­posed to in­vest part of his as­sets in cash. I some­times hang around the sher­iff’s auc­tions and liq­ui­da­tion auc­tions, though those don’t of­fer much. Some­times I buy some­thing, give it a coat of paint and sell it again. That can hardly be called an in­vest­ment in prop­erty. Spec­u­la­tion would be a bet­ter word, but that re­ply wouldn’t pro­vide you with the sought-af­ter CFP.

As far back as Septem­ber 2002, I wrote in Fi­nance Week (the fore­run­ner to Fin­week) about the sec­ond house I’d bought in the Bougainvil­lea se­cu­rity com­plex in Pre­to­ria. That was at a time when shares were giv­ing a pretty poor re­turn. Many friends fol­lowed my sug­ges­tion at the time, even in­clud­ing my golf-play­ing min­is­ter friend. I still have the prop­erty. Some­times I let it; some­times my chil­dren use it as a tem­po­rary refuge when they have their reg­u­lar hous­ing emer­gen­cies.

The rental on the orig­i­nal pur­chase price is prob­a­bly quite good, about 12%/

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