An invitation to a CFP to manage my assets
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%/