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THE WEALTH PERSPECTIVE THIRD QUARTER 2016

THIRD QUARTER 2016 | 1

Having a visionary spirit is about looking beyond the obvious to find and explore the best investment opportunities.

Contents Introduction - Marilize Lansdell

2

A word from our CIO - Adriaan Pask

3

Industry views - Lizé Visser

9

Investing and trading - Shaun van den Berg

12

Estate matters - Willie Fourie

14

Quarterly insight - Grant Meintjes

15

THIRD QUARTER 2016 | 1

INTRODUCTION Marilize Lansdell CEO PSG Wealth

In this edition, Adriaan Pask, our Chief Investment Officer, explains why global equities are our preferred asset class for long-term investing. Lizé Visser, Executive Director of Sales and Client-centricity, provides an overview of the different product wrappers in which you can combine your share investments. Shaun van den Berg, Head of Client Education, goes back to the basics by setting out the key principles of building a share portfolio, while guest author Grant Meintjes explains the benefits of using the platform to trade online. Willie Fourie, Head of Estate and Trust Services, discusses the importance of having a will and ensuring it is up to date.

Welcome to the latest edition of The Wealth Perspective With an end to local and global volatility nowhere in sight, it is more important than ever to make smart investment decisions to continue to grow your wealth. That is why this edition of our newsletter has a general theme of local and offshore securities, whether they are used as stand-alone investments or within our suite of product wrappers.

We are pleased to say that both the local and offshore tax seasons are behind us A major challenge that the industry faced during tax season was the treatment of dual-listed shares. This year we produced offshore tax certificates for the first time. This means our clients didn’t have to use a collection of their past monthly statements to complete their tax returns, saving them time and effort.

Global equities – why we prefer this asset class Although global equities are trading at a premium, this asset class remains the most attractive asset class for long-term investors. The underlying valuations are still less stressed than most of the other asset classes and there are many quality individual firms to choose from. Adriaan Pask uncovers the art and science of making appropriate investment decisions when investing in global equities.

needs. We have also invested in and embraced technology to digitise our offering in the form of the new platform. The platform gives you access to a wide range of local and international investments and various tools to facilitate your decision-making. Grant Meintjes discusses the benefits and tools in detail in his article. Before you start building a share portfolio it is important to have a solid foundation. Shaun van den Berg shares a set of basic investment principles to help you establish and maintain this foundation – especially in these volatile times. Using these principles to guide your decisions can improve your long-term outcome and help you avoid unnecessary losses.

The myPSG app offers a convenient way to help you manage your wealth Our app provides a range of functionality and is available to all PSG clients. 1. It provides a dashboard view of your position on all PSG products, providing you with a holistic view of your investment portfolio. 2. You can generate customised financial reports for investment planning, life and risk planning, and it provides access to tools such as a net tax calculator, gross tax calculator, maturity calculator and risk profiler. 3. The myPSG app also provides a handy way to stay on top of recent investment commentary and direct links to news feeds.

Our online trading platform helps you access the benefits of share investing

If you don’t have the myPSG app yet, please click iTunes or Google Play store to download it.

Lizé Visser explains the different ways to access equities by providing an overview of the available product wrappers and how these meet different medium- to long-term investment

We hope you enjoy the read Please share your feedback – we always look forward to hearing from you.

THIRD QUARTER 2016 | 2

A WORD FROM OUR CIO The art and science of investing in global equities

Adriaan Pask CIO PSG Wealth

In unpredictable times when asset prices appear to ignore valuations, choosing an asset class to secure a reasonable return has become a bit of an art form. Although investment decisions should always be underpinned by science, or objective quantitative assessment, allocations do depend on what the investment is required to do, and the amount of risk you are prepared to take.

Equities have historically delivered better returns than other asset classes Despite the dot com bubble and the financial crisis, which had devastating effects on the stockmarket, the case for investing in equities over the long term remains strong. This is because the impact of these short-term market downturns diminishes when staying invested for 10 years or more. Data shows that equities have offered the best real returns over the past 5-, 10-, 20- and 48-year periods.

Unfortunately, there is a perception that equity is the highest risk investment While cash will grow at a steady pace, investments in equities managed by active managers can reduce your longevity risk. Investors are rewarded with a premium for their uncertainty,

since equities are the most volatile asset class. Investors often get fixated with characteristics of investments that are beyond their control, such as market volatility. We, however, believe that paying careful attention to sound investment principles could be of far greater value. Regardless of our preference for global equities we must caution that equities should form part of a well-diversified portfolio, along with other asset classes.

Two graphs inform our strategic decisions about global equities Domestic equity is overvalued by 38% Our assessment of the data shown in the graphs is that domestic equity is now roughly overvalued by 38% relative to its historic yield. Some expensive pockets remain in the market and you should expect continued volatility at current levels.

Premiums and discounts in various global and domestic asset classes Current earnings yields versus long-term averages – premiums and discounts 79.3%

80% 70% 60% 50%

49.0% 38.0%

40% 30% 19.6%

20%

24.0%

24.3%

Domestic bonds

Domestic property

19.3% 13.3%

10% 0 Global cash

Global bonds

Global property

Global equities

Domestic cash

Domestic equities

% Premium (+)/Discount (-) Source: PSG Wealth investment division THIRD QUARTER 2016 | 3

A WORD FROM OUR CIO

Current earnings yields versus long-term averages 14 11.8

12

11.7

11.4

11.7

12.1

9.5

9.2

10 8.2

8

9.0

8.2

8.0 6.9

7.1

6 4.2

4 2 0

4.5 3.6

2.4

4.9

6.4

7.0

8.0

8.1

7.7

6.2 4.3

4.0

3.5 2.5

1.2 Global cash

0.9 Global Global Global Domestic Domestic Domestic Domestic Domestic Domestic Domestic Domestic Domestic Domestic Domestic bonds property equities cash bonds property equities industrials resources financials bonds bonds bonds bonds 1-3 3-7 7-12 12+ Average

Current

Source: PSG Wealth investment division

Listed property is also overvalued by 24% Based on our assessment of fair value, domestic listed property is now overvalued by roughly 24% relative to its historic yield. In addition, we believe that the interest rate cycle will affect domestic economic strength, affordability and sentiment. These are headwinds for capital growth in the listed property sector. We therefore expect property yields to normalise on the back of capital value pressure. However, as always, there are some exceptions. Selected listed property shares are experiencing growing yields, which may present some opportunities. Although broad-based property exposure is not appropriate now, we do believe there are some listed property shares that are able to make a contribution to a diversified portfolio. Domestic bonds are overvalued by 24% The aggregate yield of the BEASSA All Bond Index shows that this asset class remains generally overvalued. The implied premium is roughly 24%. With money market assets starting to offer some value, demand for bonds may decline in light of the increased risk of holding them. The relative risk-adjusted returns of bonds are also being compromised by higher interest rates on the horizon. Until recently, the gross real yield on most short-dated money market assets was nearly zero; and on an

after-cost, after-tax basis, there was very little to be excited about. We do, however, expect this to change over the coming months, as rate hikes are anticipated. Cash should form part of a diversified portfolio and even in an increasing interest rate cycle, should not be used in isolation. Relative to our valuations, global equity, although trading at a slight premium of 19.3%, therefore remains the most attractive asset class.

The art of investing offshore As professional investment managers, we are comfortable with determining the intrinsic value or risk associated with each asset class. But the days when valuations provided the main insight into potential value or risk are long gone. Today, investors understand that investment potential is also determined by management, macroeconomic conditions and the political landscape. In essence, the environment in which earnings must be generated plays an increasingly important role in how we assess investment potential and risk.

THIRD QUARTER 2016 | 4

A WORD FROM OUR CIO

Market review Market indicators Index Local equities

Local bonds

Local cash

International equities

Quarter-end value

1 month

3 months

6 months

1 year

3 years

5 years

ALSI

52 733.12

0.27%

-1.63%

8.43%

8.63%

11.00%

14.66%

Industrials

79 456.69

1.92%

-2.05%

7.16%

12.75%

15.76%

22.41%

Resources

17 658.81

-0.85%

0.89%

15.69%

-5.39%

-10.05%

-5.66%

Financials

40 303.92

-3.23%

-2.57%

6.15%

-3.93%

14.98%

18.34%

Listed Property

634.78

-4.89%

-0.65%

7.05%

3.49%

16.63%

17.10%

ALBI

516.22

-1.77%

4.48%

7.61%

4.46%

7.14%

6.94%

ALBI 1-3 Years

400.19

0.06%

2.38%

5.06%

7.24%

6.70%

6.41%

ALBI 3-7 Years

492.92

-0.64%

3.85%

6.94%

7.32%

7.55%

7.12%

ALBI 7-12 Years

566.85

-1.67%

4.55%

7.20%

4.88%

6.76%

7.10%

ALBI 12+ Years

563.97

-2.19%

5.37%

8.78%

3.25%

7.61%

6.97%

GOVI

514.63

-1.61%

4.40%

7.44%

4.88%

7.08%

6.83%

OTHI

525.75

-2.22%

4.63%

7.97%

3.24%

7.55%

7.58%

STeFI 3 Month

339.53

0.60%

1.77%

3.50%

6.70%

6.01%

5.71%

Volatility Index

13.42

13.06%

-5.43%

-34.70%

-52.80%

-7.60%

-15.75%

S&P 500

2 170.95

0.14%

4.10%

13.60%

12.55%

12.30%

14.69%

Euro Stoxx

3 023.13

1.15%

-0.83%

5.07%

-4.79%

6.44%

8.85%

Nikkei

16 887.40

1.92%

-2.02%

5.37%

-10.60%

8.05%

13.53%

Hang Seng

22 976.88

4.96%

10.39%

20.22%

6.03%

1.88%

2.27%

973.72

2.22%

3.12%

11.59%

4.09%

10.14%

13.50%

MSCI World

1 719.52

-0.13%

2.68%

11.14%

4.50%

5.59%

8.39%

MSCI World ex US

1 686.99

-0.17%

1.27%

8.86%

-2.27%

-0.43%

1.56%

FTSE 100

6 781.51

0.85%

8.84%

11.23%

8.54%

1.92%

5.14%

Dax

Performance reported in base currency, using total return Sources: I-Net, PSG Wealth investment division As at 31 August 2016

THIRD QUARTER 2016 | 5

A WORD FROM OUR CIO

Businesses and their earnings must be sustainable

The science behind finding value in global equities

When we analyse global stocks, we look at the sustainability of the business and its earnings. Businesses should generate a lot of cash, with strong corporate profits and a lean balance sheet with little debt. This enables the business to absorb macroeconomic shocks. Only once we have a sense of comfort about this, will we start considering valuations and other quantitative measures. Having sight of the bigger picture enables us to make sound investment decisions. We also focus on selecting fund managers who actively analyse shares according to these criteria.

The S&P 500 generated a return of 13.60% over the past six months, which brings the five-year historic annualised return for the S&P 500 to 14.69% in dollar terms. The FTSE 100 generated returns of 8.84% for the past three months and 11.23% for the past six months – in other words, it continued to generate positive returns despite the unexpected Brexit vote in June. The US has, however, been the primary driver of global stockmarket returns, as the S&P 500 was the only major global index that grew by more than 10% over the past year.

There is a wider opportunity set offshore We prefer global stocks to domestic shares because generally offshore shares provide more opportunities. There is a greater probability of us finding a good business at an attractive price. Part of the art of investing in offshore equities is the ability to stay the course and not be tempted to chop and change your decisions. This art form has, however, always been informed by our science or quantitative analysis.

Combined with the weakness in the rand over the same period, this has resulted in phenomenal returns for investors who diversified offshore.

Wage growth/consumer spending/corporate earnings wheel

Wage growth

Corporate earnings

Consumer spending

Source: PSG Wealth investment division

THIRD QUARTER 2016 | 6

A WORD FROM OUR CIO

Tactical asset allocation preferences

EMERGING

DEVELOPED

South Africa

Global

Strategic asset allocation Tactical asset allocation Changes this month Overweight: Tactical recommendation to hold more of the asset class than specified in the strategic asset allocation

Neutral: Tactical recommendation to hold the asset class in line with its weight in the strategic asset allocation

Underweight: Tactical recommendation to hold less of the asset class than specified in the strategic asset allocation

Source: PSG Wealth investment division

THIRD QUARTER 2016 | 7

A WORD FROM OUR CIO

Multi-nationals provide geographical and currency diversification

Low wage growth in the US is a concern but corporates are healthy

In addition to promising long-term returns, global equities also provide global exposure and therefore diversification. South Africa contributes 1% to global GDP and a similar percentage of corporate earnings. Yet most investors focus only on local investment opportunities. By investing in multi-national companies, you can reap the rewards of global economic growth, without making any regional specific allocations. In addition, investing in a business that is geographically diversified usually diminishes specific foreign exchange rate risks.

A potential headwind to investing in global equities is the stagnant growth in US wages. Although data shows that more Americans are being employed, this has not led to the expected increase in consumer spending. The reason is that the wages received by most of these workers are not sufficient to enable excessive spending to support faster economic growth.

We prefer investing in multi-nationals: • with strong balance sheets who adjust their investments to emerging and developed markets as their business strategy informs • who are diversified geographically as well as across various industries

There are ways in which to manage the impact of rand volatility The biggest near-term risk for South African investors is volatility in the rand. However, there are ways in which professional investment managers can manage this risk effectively. Our investment managers, for example, have the required access and expertise to use currency-hedge instruments to manage the rand’s volatility. Having said that, the rand is now trading at a discount of greater than three standard deviations to purchasing power parity (PPP). We can make two key observations from this: 1. The rand is trading well above the long-term PPP benchmark, which appears to be excessive. Although a sovereign debt downgrade would result in additional short-term volatility, we are focused on the long-term outlook. 2. The margin at which the rand is currently trading indicates that further weakness is unlikely. In fact, the rand may even strengthen from these levels.

However, the balance sheets of corporates in the US are healthy. We expect the wage growth/consumer spending/corporate earnings wheel to start spinning once corporates start to use their higher-than-normal cash positions to hire more employees or to invest in their businesses. This could lead to more money in workers’ pockets, increased spending and better economic growth, which leads to corporate earnings growth.

We are overweight developed market equities In tough economic conditions we prefer to be overweight in defensive shares that offer some protection in volatile market conditions. We do, however, consider cyclical shares when underlying valuations are sound.

Global equities remain the most attractive long-term asset class Although global equities are trading at a premium, this asset class remains the most attractive asset class for long-term investors. The underlying valuations are still less stressed than most of the other asset classes and there are many quality firms to choose from.

THIRD QUARTER 2016 | 8

INDUSTRY VIEWS Grow your wealth on our investment platform Lizé Visser Executive Director Sales and Client-centricity PSG Wealth

To get exposure to the growth potential of shares and combine these to diversify against the risk of loss, you need to choose a product wrapper in which to ‘house’ your underlying investments. These vary considerably and are built to meet specific investor needs. Please read the summary below to understand which of these may be best for your immediate and long-term needs.

You must choose a product wrapper and underlying investments

We offer a wide range of underlying investment options

When you invest to meet a medium- to long-term investment objective, you must make two key decisions. You need to decide what product wrapper to use to meet your objectives and you need to choose the underlying investment funds or instruments in which to invest. We offer investors a range of simple and cost-effective product wrappers, with varying liquidity and other benefits.

In addition to the PSG product wrappers, we also offer a wide range of investment funds and instruments. You can invest in our multi-managed solutions, unit trusts from PSG Asset Management, unit trusts from a wide range of other management companies, and a broad selection of shares and other securities. Before doing this however, you should first decide which product wrapper is best suited to your specific investment needs and goals.

How the different PSG product wrappers meet your needs Product wrapper

Summary

Tax Free Investment Plan

A flexible investment that gives you tax-free investment growth The PSG Wealth Tax Free Investment Plan is a flexible investment product geared for growth. It also has the unique advantage of offering tax-free investment returns. How much money do you have to invest?

• Minimum lump sum investment: R6 000 • Minimum debit order investment: R500 per month How it works You can make flexible contributions (lump sum, debit order or ad hoc contributions) up to the specified limits, namely a maximum of R30 000 per year and R500 000 over the lifetime of the investment. These limits are set by law. There are no restrictions on withdrawals, so you can access your savings at any time. What are your underlying investment options? You can choose any combination of unit trusts on our platform that do not charge performance fees and offer clean pricing (this means costs payable to the investment manager, versus investment platform and adviser remain separate and are not bundled together in the price). You can also switch between unit trusts easily and at no cost. Voluntary Investment Plan

A flexible option that provides unrestricted access to your money The PSG Wealth Voluntary Investment Plan is a flexible, personal investment portfolio that you can tailor to meet your individual needs and risk tolerance. How much money do you have to invest?

• Minimum lump sum investment: R20 000 • Minimum debit order investment: R500 per month How it works You can make lump sum, debit order or ad hoc investments, or choose any combination of these. You can switch between unit trusts easily at any point during the investment period, choose how long you would like to stay invested for, and withdraw your capital at any point. What are your underlying investment options? You can choose any combination of unit trust funds available on our platform.

THIRD QUARTER 2016 | 9

INDUSTRY VIEWS

Retirement annuity

A retirement savings vehicle The PSG Wealth Retirement Annuity is a personal retirement savings vehicle that helps you save in a disciplined way for retirement. How much money do you have to invest?

• Minimum lump sum investment: R20 000 • Minimum debit order investment: R500 per month How it works You can make lump sum, debit order and ad hoc contributions. You must remain invested until 55 years of age, and unless you leave the country or retire early due to ill health or disability, you cannot access your money before this time. What are your underlying investment options? Your selection of underlying investments will have to comply with the limits set by Regulation 28 of the Pension Funds Act which caps (amongst other things) equity and offshore exposure. You can choose from a broad range of unit trust and other funds, and a wide array of shares and securities through the Private Share Portfolio. Endowment

Disciplined savings for at least five years The PSG Wealth Endowment helps you to save with discipline, as you have a minimum investment period of at least five years. How much money do you have to invest?

• Minimum lump sum investment: R20 000 • Minimum debit order investment: R500 per month How it works You can make lump sum and recurring contributions. There is an initial restriction period of five years, which means you only have limited access to your investment in the first five years. What are your underlying investment options? You can choose to invest in any combination of unit trusts and other funds. You can switch freely between these at any point during the investment period. Preservation fund

A vehicle to preserve your retirement savings if you change jobs The PSG Wealth Preservation Fund is a pre-retirement product that helps you to preserve and grow your retirement savings when you leave your employer’s pension or provident fund. How much money do you have to invest?

• Minimum lump sum investment: R20 000

How it works You can only invest a lump sum from your employer pension or provident fund – you cannot make additional, ad hoc contributions. You must remain invested until 55 years of age, and unless you leave the country or retire early due to ill health or disability, you cannot access your money before this time. What are your underlying investment options? Your selection of underlying investments will have to comply with the limits set by Regulation 28 of the Pension Funds Act which caps (amongst other things) equity and offshore exposure. You can choose from a broad range of unit trusts, a selection of hedge funds, and a wide array of shares and other securities through the Private Share Portfolio.

THIRD QUARTER 2016 | 10

INDUSTRY VIEWS

Living annuity

A post-retirement vehicle that provides you with a flexible income The PSG Wealth Equity Linked Living Annuity enables you to re-invest your accumulated retirement savings when you retire to provide you with an income in retirement, while targeting further investment growth. How much money do you have to invest?

• Minimum lump sum investment: R20 000

How it works Each year, you must withdraw between 2.5% and 17.5% of your investment as income. This gives you the flexibility to control your investment. Since your investment returns are not guaranteed, this also means that you are responsible for making appropriate choices when it comes to your investments and withdrawal rate to ensure that your retirement capital lasts. Because of the scope and complexity of the factors that can affect your retirement capital, it is generally advisable to ask a financial adviser to help you with these decisions. What are your underlying investment options? You can choose to invest in a broad range of unit trusts, a selection of hedge funds and a wide array of shares and other securities through the Private Share Portfolio. Although you can choose any combination of underlying investments, it might be prudent to adhere to the guidelines set by Regulation 28 of the Pension Funds Act.

We help you navigate the wide range of investment options Choosing an appropriate product from this product table to meet your needs, can be a relatively simple choice. Choosing the underlying investments can however be more of a challenge, because of the wide range of options available and

the challenge of diversifying enough to reduce risk, without compromising on the potential for growth that comes from a more concentrated portfolio. To help you make informed choices, we have developed a tool that enables you to search for unit trusts according to specific criteria and compare these directly. Please click here to find this tool.

THIRD QUARTER 2016 | 11

INVESTING AND TRADING Build a solid foundation for your share portfolio Shaun van den Berg Head of Client Education PSG Wealth

A solid investment foundation is crucial to achieving long-term success. In the words of author Stephen R. Covey: ‘If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster’. When it comes to sensible long-term investment decisions, it pays to stick to the basics.

Building a share portfolio takes time A share portfolio is built over a period of time – it does not happen overnight. The first thing to consider is whether you want to invest a lump sum in a wide variety of shares, or to invest in fewer shares on a monthly basis. Buying shares on a monthly basis will involve higher relative trading costs since these costs are spread across the amount invested. Having fewer shares in your portfolio means you also have to be confident in your stockpicking ability. If you only own one share, there is a 100% chance of losing money if the price of that share drops. As you add to your share portfolio, the chances of capital loss drop to 50% with the second share, 33.3% with the third share, 25% with the fourth share, and so on.

Diversification reduces risk Every investor should aim to build a well-diversified portfolio of quality shares. Diversification in a share portfolio refers to investing in various companies across different sectors and industries, thereby reducing your exposure to risk. In an effort to reduce risk, you may decide to spread your investment over eight to twelve shares and across three to five sectors. Ideally your investments should be across sectors with low correlation to one another. In other words, you should invest in industries and sectors that do not move up and down at the same time or at the same rate when market conditions change. By combining different shares, you are less likely to experience major losses. When the price of some of your shares drop, there’s a good chance that others will be on the rise. This provides a more consistent overall performance.

A diversified portfolio is still subject to market risk While minimising risk is important, you need to consider it together with another investment objective, namely achieving better investment returns than the market average. No matter how diversified your share portfolio is, you can never eliminate risk completely. You may avoid the risks associated with individual shares (‘unsystematic risk’) by diversifying your portfolio, but there is still a risk of an overall market correction (‘systematic risk’) that can affect most of your shares.

A diversified portfolio may dilute investment returns If you are invested across five sectors, and one performs exceptionally well, your gains will be diluted compared to if you were invested in that one sector alone. The more extensively diversified a share portfolio, the greater the likelihood that its performance will therefore, at best, reflect the performance of the overall market. It is a continuous process to manage the balance between concentration in certain shares and sectors, and the diversification of your portfolio.

Guard against over-diversification One of the advantages of a more concentrated share portfolio is that while it does increase risk, it also increases potential reward. Share portfolios that deliver the highest returns are typically not widely diversified, but rather have investments concentrated in a few carefully selected industries or market sectors that outperform the overall market substantially. A more concentrated portfolio also enables investors to focus on a manageable number of quality shares.

Decide on an appropriate investment strategy Once you decide on the structure of your share portfolio, the next step is to decide on an appropriate investment strategy. An investment strategy is a set of principles to guide you in selecting appropriate shares to include in your portfolio. Below we explain some of the most common investment strategies which can be used individually, or in combination with one another. • Value investing Value investing can be described as bargain hunting, because it involves looking for shares that are undervalued (compared to certain valuation metrics in fundamental analysis), and buying them for less than what they are worth. The value investor will look to benefit from the profit by selling the share when it reaches the value they have predetermined to be its true value.

THIRD QUARTER 2016 | 12

INVESTING AND TRADING

• Growth investing With capital appreciation as the main objective, growth investing focuses mainly on companies that show signs of above-average growth. These companies’ share prices often appear expensive based on their price-earnings or price-tonet asset value ratios. • GARP (growth at a reasonable price) investing GARP investing is a combination of the value and growth strategies, offering the best of both worlds. It involves investing in companies that are somewhat undervalued but still have solid sustainable growth potential. • Income investing The aim of this strategy is to generate income by investing in shares that pay relatively high and regular dividends. These are usually shares in well-established, mature companies with a long track record of regularly increasing dividends.

We are all unique – your strategy should be too Investors have different investment objectives and skills, which means that certain tactics and strategies will be more appropriate for some investors than for others. The challenge is to focus on achieving returns that are better than the overall market, with a level of risk that you find palatable.

Trade online with us to implement your strategy Our platform gives you direct market access to a range of local and international shares that accommodate a range of investment needs and preferences. Please click here to read more about the benefits of this platform in the complementary article. Please click here to find out more on our website.

THIRD QUARTER 2016 | 13

ESTATE MATTERS Is your will up to date? Willie Fourie Head of Estate and Trust Services PSG Wealth

A will is easy to prepare and ensures that your money, possessions and property go to the right people when you die. When you think about setting up a will, you need to consider your assets, values, priorities and dependants. If you don’t have a complex set of assets and wishes, the process can be simple. But it may well pay to consult an expert fiduciary practitioner. They are equipped to apply the latest legislation to your needs and help you structure your wealth to give effect to your wishes and minimise tax.

A will is essential to protect and pass on your legacy Passing away without a will can have devastating consequences for your loved ones, especially if they are minors. If this happens, your estate will be distributed according to the Intestate Succession Act. This means that neither you nor your dependants will have any control over how your assets are distributed. It is therefore essential to have an up-to-date will to ensure that your legacy is protected and passed on to future generations. The good news is that a will does not have to be complicated or expensive to be effective. A carefully thought-through will, drafted by a professional fiduciary practitioner, can give you peace of mind that your wishes will be adhered to. It is also crucial to update your will when your circumstances change. Some of the major changes in personal circumstances that will require you to revise your will are marriage, divorce or death of a family member, the birth of a child, and a change in residence status. A change in legislation may also require you to update your will.

Don’t leave your loved ones in a tricky position Recent statistics released by the Master of the High Court indicate that a high number of deceased estates reported over the last year did not have a will in place. These estates are wound up in terms of the Intestate Succession Act, which prescribes who will inherit from the estate and what percentage they inherit. As a result, your dependants may be excluded from those who benefit from the proceeds of your estate, leaving them in a difficult position. The unintended consequences of passing away without a will cannot be undone.

A will can save you money A professionally drafted will can: • Reduce estate duty and other taxes payable. The long-term saving far outweighs the once-off expense of drafting the will. • Provide you with peace-of-mind. You can ensure that your instructions about how you wish your assets to be distributed will be fulfilled. • Create a testamentary trust to protect any children’s inheritance, so that it is managed in a responsible way. There are many examples of squandered wealth to illustrate the impact of not doing so. We believe that it should be compulsory to draft and maintain a will, especially where the needs of minors are at stake. In the case of employer pension funds, the trustees ensure that investors’ savings are controlled and managed for the dependants’ benefit. Unfortunately, there isn’t a control mechanism like this in place for discretionary assets owned by individuals.

We have the skills and accreditation to help The Fiduciary Institute of Southern Africa (FISA) has become the representative mouthpiece for the fiduciary industry in recent years. In future, fiduciary practitioners will be required to be members of FISA and to hold the Fiduciary Practitioner of South Africa (FPSA) designation to ensure sound advice. All PSG Wealth fiduciary practitioners are members of FISA. They can provide expert fiduciary advice and support on all aspects of estate planning, including drafting wills, trusts and deceased estate administration.

Keep it simple Many people think that drafting a will is a time-consuming and expensive exercise. The truth is that a will does not have to be complicated to be effective. Depending on your personal circumstances, it could only cost you the same as a meal out. If you are comfortable with a one-size-fits-all approach, you can even buy a pre-printed template.

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QUARTERLY INSIGHT The benefits of our trading platform Grant Meintjes Head of PSG Securities PSG Wealth

In this article, we showcase and explain the benefits of using the PSG Wealth platform to trade online. This includes access to a choice of instruments, online chat and tutorial support, the flexibility to invest locally and internationally, stock-specific research, and predefined suggestions to help you select investments to meet your investment requirements. Please click here to read the complementary article in this edition about the basic investment principles that one should apply when investing.

Volatile times remind us of the importance of a long-term focus The market has experienced its fair share of volatility this year. Locally, this volatility was mainly driven by the uncertainty surrounding South Africa’s credit rating and the country’s deteriorating investment outlook. Internationally, Brexit and the general global political landscape (for example, terrorist attacks in Europe and Donald Trump’s election campaign) played the biggest roles. This reminds us that the market is, and will always be, riskier for the short-term investor than the long-term investor. Investors who maintain their long-term focus during the downturns will eventually reap the rewards.

Shares offer the best return prospects over the long term

Predefined suggestions to match requirements As with any investment, you should have a clear investment objective when you start building your share portfolio. Once you have defined this, our platform can help you identify shares that meet your requirements. Some of the predefined suggestions available include the ‘top 10 buys’ for large and small caps respectively, undervalued quality shares and investing for dividends. Company analysis from our research team If you are interested in a specific share, you can access our investment divisions company analysis on that specific share. This includes key financial data that can help inform your investment decision, such as the share price, dividend yield, and our recommendation on that share.

We offer a range of tools to facilitate your stock selection

Access to international opportunities Owning shares in foreign markets enables you to diversify your portfolios and to participate in exciting growth opportunities. The increase in the amount South Africans are able to take offshore (known as your ‘offshore allowance’) in recent years, has pushed up the demand for international trading opportunities. The volatility and weakening of the rand over the past few months, also sparked an increase in offshore investing. As a result, international trading has become much more accessible. The PSG platform also enables you to trade internationally. This means you can invest in sought-after international companies such as Apple, Pfizer or Google on a local platform. The offering includes ordinary shares, exchange traded funds and American depositary receipts.

Depending on your level of investment expertise and experience, selecting the appropriate shares to include in your portfolio can be challenging. The important thing is to make informed decisions based on a rational evaluation of the stock’s long-term prospects, and to avoid emotional decisions based on fear or hype in the market. Our platform gives you access to a range of tools and services to help you in your decision-making.

Currency conversions for investments of R1 million or less You don’t need clearance from SARS on the first R1 million you invest offshore. In this case, our offshore securities team can help you convert your rands into the base currency of the offshore investment account, whether it is British pounds, US dollars or euros.

History shows that, over the long term, shares deliver better returns compared to other asset classes such as bonds or cash, despite shares holding a higher investment risk. For example, over the last 10 years, the FTSE/JSE All Share Index (ALSI) returned 13.34% compared to the 7.5% return from the money market. To optimise your returns over the long term and make the most of your time in the market, it is therefore important to have a sufficient exposure to shares in your portfolio.

A wide range of investment choices You can access all the shares listed on the ALSI. You also have access to 35 international exchanges across the globe.

Explore opportunities to grow your wealth Please click here to find out more about the services and tools you can access through our online platform. We also offer online tutorials to help you set up and manage your portfolio. In addition, our experienced trading team can answer your questions via an online chat function. THIRD QUARTER 2016 | 15

Disclaimer PSG Wealth is a brand underneath PSG Konsult Ltd, which consists of the following legal entities: PSG Multi-Management (Pty) Ltd, PSG Securities Ltd, PSG Fixed Income and Commodities (Pty) Ltd, PSG Scriptfin (Pty) Ltd, PSG Invest (Pty) Ltd, PSG Life Ltd, PSG Employee Benefits Ltd, PSG Trust (Pty) Ltd, and PSG Wealth Financial Planning (Pty) Ltd. Affiliates of the PSG Konsult Group are authorised financial services providers. The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG Konsult Group and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken on information in this document. Should you require further information, please consult an adviser for a personalised opinion. Collective Investment Schemes in Securities (CIS) are generally medium- to long-term investments. The value of participatory interests (units) may go down as well as up and past performance is not a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. Fluctuations or movements in the exchange rates may cause the value of underlying international investments to go up or down. A schedule of fees and charges and maximum commissions is available on request from PSG Collective Investments (RF) Limited. Commission and incentives may be paid and if so, are included in the overall costs. Forward pricing is used. The portfolios may be capped at any time in order for them to be managed in accordance with their mandate. Different classes of participatory interest can apply to these portfolios and are subject to different fees and charges. Figures quoted are from I-Net, Stats SA, SARB, © 2016 Morningstar, Inc. All Rights Reserved for a lump sum using NAV-NAV prices net of fees, includes income and assumes reinvestment of income. PSG Collective Investments (RF) Limited is a member of the Association for Savings and Investment South Africa (ASISA) through its holdings company PSG Konsult Limited. Conflict of Interest Disclosure: The fund may from time to time invest in a portfolio managed by a related party. PSG Collective Investments (RF) Limited or the Fund Manager may negotiate a discount on the fees charged by the underlying portfolio. All discounts negotiated are reinvested in the fund for the benefit of the investor. Neither PSG Collective Investments (RF) Limited nor the Fund Manager retain any portion of such discount for their own accounts. PSG Multi-Management (Pty) Ltd (FSP No. 44306), PSG Asset Management (Pty) Ltd (FSP No. 29524) and PSG Collective Investments (RF) Limited are subsidiaries of PSG Group Limited. The Fund Manager may use the brokerage services of a related party, PSG Securities Ltd.

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