Category Archives: Finance

How to optimize the Omni channel strategy.


The change in technology has brought about so much change on how the customers and the banks relate. The organization of omni channel is beyond the cross, multi and single channels and it greatly facilitates the delivery of customized offers across all clients from all the walks of life. Omni channel enables you to perform analytical optimization. The main reason for the use of omni channel in the banking industry is so as to enable you know what campaigns and messages should go to which people. Also, omni channel determines what channel is most preferred by customers thus easing the marketing efforts. Below are some of the ways that the banks use to increase the use of omni channel in their banking services.

A. You should clearly define your success.  has succeeded in optimizing the use of omni channel strategy by setting the requirements and their success is already defined. Once you get the requirements needed for this strategy, such as software, hardware as well as resources needed for the channels,you should have a clear reason for the implementation. You should have in mind what you would want to achieve in a specific time frame.

B. Create a stable engagement through a channel quality.

You should determine the engagement and concentrate on improving the customers’ experience. For instance, you need to have a good number of staff tending to the customers. The customer service representatives should represent from the departments in the banking industry.  Ensure that there is proper data analysis in order to determine and understand the needs of the customers. Exposing your customers to consistent communication makes them feel like a part of the bank and they will tend to give valuable recommendations.

C. Stay as competitive as possible and do not let the data come in your way.

When you are in a competitive industry, it is normal to keep looking at your competitors’ data. This data should not stand in your way, be it risk, fraud or even the customer base data it is important to work hard towards becoming the most preferred bank for the customers. To achieve this, you can strive to meet the needs of your customers.

D. Always remember your brand.

Across the omni channels, it is important that you should deliver a very strong and memorable brand. In addition to remembering your brand, you should ensure that your brand is consistent and make the customers feel proud to be associated with the banks.

The above four strategies are some of the major practices that help the financial institution easily use and optimize the omni channel strategy. The use of omni channel strategy contributes much in achieving the banks goals and agendas.

Financial advice worth the cost

In this advice column Riette Coetzee from Alexander Forbes answers a question from a reader who wants to know whether he really needs a financial advisor.

Q: I will be going on pension at the end of this year at the age of 65. I have no debt and my home is paid for.

I have been involved with four different financial advisors, but cannot get away from the exorbitant costs that are involved. I have my pension and a separate retirement annuity (RA) and about R2 million in cash which they all would love to invest for me. I am left with the impression that they could invest my money to earn about 1.5% per annum more than I could, but since their fees will be 1%, it hardly makes it worth my while.

I now seem to think that my best option is to take my R500 000 tax-free allowance from my pension and draw down the minimum of 2.5% on the rest. If I subsidise myself from my cash reserves, I can survive for the first six years of my retirement while still leaving the rest of my pension to grow. I would not even have touched my RA yet.

However I’m still wondering if I  would be better off investing the cash amount through a financial advisor?

To answer this question, we need to take a step back. Before you can decide what you want to do with your money, you need to know what you want to do with your retirement.

One person’s retirement dreams are very different from another’s. For some it is to slow down, but for others it is to do the things that your working life never allowed you to do.

At your age a financial plan should support your remaining life plan and lifestyle. Your  financial plan is one component of a flexible life plan that will need to see you through from your mid 60s into your late 90s.

Bear in mind that if you manage your investments yourself, you need to set aside the time to monitor your portfolio and be disciplined to adjust to different market conditions. You also have to keep your emotions in check when markets are volatile. These demands and complexities of successful investment management can prove challenging, even for the most informed individual investor.

People everywhere are also living longer. You therefore have to consider the long-term implications of managing risk, your money, tax and liquidity.

In addition, we live in very uncertain times. The IMF has cut South Africa’s 2016 growth forecast to 0.1%, foreign investment in the country has dipped to its lowest in ten years, a credit downgrade is still on the horizon, and there are still uncertainties around Brexit and Chinese growth, to name only a few. Getting the right financial advice to manage these risks is more important than ever.

A professional advisor will help you set up different investment strategies to achieve certain financial goals and provide assistance and guidance with retirement and estate planning. Competent financial advisors are knowledgeable about financial markets, investing landscapes and tax implications.

At your age there’s much more to consider than saving roughly 0.5% in fees. It is vital to ensure that you’ve planned appropriately so that your flow of  retirement income suits your life expectancy, while at the same time taking into consideration factors such as inflation increases and the need to tick off some of the items on your bucket list. Financial planners assist in managing your financial risk to a level of comfort and help making decisions that are in line with your long-term financial objectives.

Bear in mind that the savings you are looking to invest are your hard-earned cash. This represents your reward after many years of working. They can be used  to sustain your desired retirement lifestyle on a month-to-month basis, fulfil your dreams of travelling or taking on new hobbies and be sufficient to take care of those unexpected emergencies. You therefore owe it to yourself to look after this money as best you can.

There are several options available for investing our cash. A financial planner will help you to decide on the most tax-efficient option available, not only from an investing point of view but also when withdrawing. They will also consider different vehicles for different goals, and will also plan for liquidity during your life and on death.

Reality of retirement

In this advice column Robin Gibson from Harvard House answers a question from a reader who only has ten years to save up for retirement.

Q: I am 56 years old, healthy, have a reasonable job and presume I can work for the next 10 years.

I have a home which is worth about R2.5 million, with a relatively small bond. However, apart from an annuity worth about R300 000 I have no other savings.

My youngest child is almost independent, and in a couple of months time I will be able to save R10 000 per month. This amount can increase to R20 000 in the next 18 months.

How should I invest this money and how much trouble am I in?

The really important question here is the last one. In our view, any investor currently requires approximately R1 million for every R4 200 of monthly income they want before tax and after costs.

This yield is specifically constructed to provide an escalating income that keeps up with inflation. We are aware that an investor can source a fixed yield that is higher, but that would mean that it doesn’t increase in the future and progressively becomes worth less.

This also assumes that your capital will be maintained and over occasional periods will grow faster than inflation. This is important, because if you don’t have to use up your capital, how long you live and how long you need an income for become inconsequential. You could live beyond 100 and still have a secure income.

This is obviously the optimum position.

The next important question is then what to invest in to give you the best chance of building a retirement pot. The table below will demonstrate a value in today’s money of what your savings could be worth in ten years’ time. This is based on 18 months of investing R10 000 and then 102 months of putting aside R20 000 per month.

Bang for your buc

Determining what added value you get when you pay above-benchmark investment fees for your collective investment scheme is similar to weighing the cost-effectiveness of a luxury German sedan against a Korean family car.

Will you get enough additional value from the investment to compensate you for the extra money you have to pay? Put simply, will you get bang for your buck?

If a fund delivers a 100% return during a particular year, an investor will probably have no problem sacrificing 10% of the return in fees. But if the return was 11%, forfeiting 10 percentage points in costs would make no sense.

This is probably the most important point in evaluating the fees you pay for your collective investment, says Pankie Kellerman, chief executive officer of Gryphon Asset Management. It is not about the absolute quantum you pay, but about what you buy for it.

The impact of costs

Calculations compiled by Itransact suggest that if an amount of R100 000 was invested over 20 years at an investment return of 15% per annum (inflation is an assumed 6%) at a cost of 1%, the investor would lose 17% of his returns as a result of fees. If costs climb to 3%, the investor would sacrifice almost 42% of his returns.

Unfortunately, it is not always that easy to get a clear sense of what you pay and what it is you pay for, but the introduction of the Effective Annual Cost (EAC), a standard that outlines how retail product costs are disclosed to investors should make this easier.

Shaun Levitan, chief operating officer of liability-driven investment manager Colourfield, says the time spent looking around for a reduced cost is time worth allocating.

“I think that any purchase decision needs to consider costs, but there comes a point at which you get what you pay for.”

You don’t want to be in a situation where managers or providers are lowering their fees but in so doing are sacrificing on the quality of the offering, he says.

“There tends to be a focus by everyone on costs and [they do] not necessarily understand the value-add that a manager may provide. Just because someone is more expensive doesn’t mean that you are not getting value for what you pay and I think that is the difficulty.”

Costs over time

Despite increased competition and efforts by local regulators to lower costs over the last decade, particularly in the retirement industry, fees haven’t come down a significant degree.

Figures shared at a recent Absa Investment Conference, suggest that the median South African multi-asset fund had a total expense ratio (TER) of 1.62% in 2015, compared to 1.67% in 2007. The maximum charge in the same category increased from 3.35% in 2007 to 4.76% in 2015. The minimum fee reduced quite significantly however from 1.04% to 0.44%.

Lance Solms, head of Itransact, says the reason fees remain relatively high, is because customers are not asking active managers to reduce their fees. He argues that it is easier for investors to stick to well-known brands, even if they have access to products that offer the same return at a cheaper fee.

Invest or put money into your bond

unduhan-30In this advice column Alexi Coutsoudis from PSG Wealth answers a question from a reader who wants to know what to do with a lump sum investment.

Q: I have R100 000 in a unit trust. At the same time I have an outstanding bond. Would it be better to remove the funds from the Investment and offset part of the home loan?

Advisors are frequently asked this question. This often has more to do with personal risk preference than with economic rationality. To answer this question, however, certain assumptions must be made, and I specifically won’t look at tax to keep the answer succinct.

The rational answer

Let us assume that the interest rate on the bond is at the prime lending rate. That is currently 10.50%

The second assumption we need to make is about what the risk level of the unit trust in question is. A money market unit trust has a very different risk and associated return goal than an equity unit trust.

A low-risk money market or income fund aims to beat inflation and offer a real return of 1% per annum. Thus, if the R100 000 is in an income unit trust only yielding 7% to 8%, it would be rational to secure the higher guaranteed return of 10.5% and transfer the funds into the bond.

However, if the money is in a balanced fund which generally targets a 5% real return, it would be more rational to remain invested as the real return is in excess of the bond interest rate.

It is also important not to fall into the trap of looking at the short-term underperformance of equity linked funds in a time like now and compare this to a resilient prime rate. This may result in the wrong decision to sell out at the wrong time. Every situation is unique and the best course of action is to get advice from a financial advisor who will look at the big picture and your individual circumstances.

The subjective answer

The other way I would advise a client on this is a more subjective approach – the sleep test. Quite simply, what makes you sleep better at night? Would that be a bond balance of R100 000 lower than it is now with no funds invested, or the same outstanding bond balance but R100 000 invested?

The answer will be different for each individual and there are a lot of factors that influence one’s financial decision making such as your view of debt as either toxic or as an enabler. For some people having R100 000 invested offshore, for example, gives them comfort. Therefore, because the economic rationality argument is often such a close contest, considering the subjective approach may help make the final decision easier.

Many people are cash strapped

Mounting financial burdens on consumers has led to a 54% increase in disputed debit order complaints over the past year, says the Ombudsman for Banking Services Clive Pillay.

“It is a worrying sign that so many people are cash-strapped and that so many people are over-indebted,” said Pillay.

According to data from the Payments Association of South Africa (Pasa), around 31 million debit orders amounting to R72 billion are processed per month, of which 1.2 million are unpaid and a further 170 000 are disputed.

There are two categories of debit orders: EFT debit orders, which are processed on the date chosen by consumers and mostly after normal business hours, and early debit orders, which are collected shortly after midnight and immediately after the processing of EFT credit payments such as salary payments, explained Pillay.

He said several complaints lodged with his office centre around non-authenticated early debit orders, whereby transactions are processed prior to the agreed date. Pasa data show that almost 14 million non-authenticated early debt orders worth R9 billion are processed each month, 4 million of which are unsuccessful, with 600 000 disputed.

An estimated 90% of disputed debit orders are for so-called ‘cash management’ reasons, Pillay said, citing Pasa data. “The Payments Association investigates every disputed debit order and often they are legitimate disputes, but there are also ones that are not legitimately stopped. They are done simply because you have to pay five people but you only have money to pay four, so you stop one debit order and then double it up the following month,” he said.

Dishonouring debit order commitments for cash management reasons is considered unethical or fraudulent. Failure to pay debit orders on time or within the 15-day grace period, can result in penalty charges and even the cancellation of contracts. The cancellation of an insurance policy would result in no coverage in the event or a loss and no refunds of premiums can be claimed.

Consumers struggling to meet their financial commitments should approach their banks for assistance, advised Pillay.

The Code of Banking Practice commits banks to assist clients in dealing with financial difficulties. As such, banks are obliged to review their clients’ financial situation with the said clients and develop a plan to address any financial difficulties. Such a plan may include a so-called ‘payment holiday’, whereby certain payments are suspended for a three-month period, a temporary reduction in instalments or halting of interest payments, he said.

He added that such informal assistance would not lead to clients being blacklisted or being listed as a bad risk with various credit bureaus, which will have a negative impact on the client’s ability to access credit in the future.

“Access to finance is the lifeblood of industry and the individual. Without access to finance, you will be reduced to a cash existence and, if reduced to a cash existence, you will probably have a low quality of life,” he said.

Investment in the short term

In this advice column Kirsty Scully from Core Wealth answers a question from a reader who wants to know what to do with a lump sum investment.

Q: I’ve decided to sell my house, and I expect to realise just under R1 million. I would like to use this money to pay off our debts like our credit cards and possibly our cars. That will leave me with approximately R500 000.

My plan is not to buy another house just yet as we are not sure if we may move to a different province or even different country in the next couple of years. With all that is going on in the markets and considering that all of my other money is either in exchange-traded funds (ETFs), unit trusts, retirement annuities and another property that I own, would it be wise to invest my money in physical gold? Or would it be better to invest in a money market account where I can get 6.4%?

I want something safe, as it is not often in life you get a lump sum like this. We are also sacrificing having a nice big house in order to live in a smaller dwelling for the sake of being prudent and using this opportunity wisely.

As with many similar questions that I have been asked over the years, it is vital that you meet with a financial planner. A full understanding of your financial situation is required. It is not wise to give recommendations based on only a portion of your investment information.

However, that said, let’s assume that I have understood your risk profile accurately, and that a ‘couple of years’ refers to two years. I would consider the following to be wise counsel:

It is unlikely that allocating the full amount to gold would be appropriate as the price of gold can be volatile over short-term periods. I would also assume that the lump sum of R500 000 is unlikely to be a small portion (i.e. less than 5%) of your overall portfolio, and this makes it even less appropriate to allocate the full amount to gold.

In addition, you specifically ask about physical gold, which in most cases is Krugerrands. When investing in Krugerrands there are fees of about R3 000 per ounce (you can buy for R21 000 versus selling for R18 000 as per the Cape Gold Coin Exchange), which need to be taken into account. Over a short-term horizon, these costs could be really punitive.

The gold price would therefore have to increase substantially over your two year period to beat the 6.4% per annum offered by your money market option. Remember you will also have to take into account the storage and insurance costs of holding physical gold. Therefore, taking all things into consideration, I would consider gold to be a relatively high risk investment for you.

The money market is probably one of your safest options. However, I am interested that you quote an interest rate of 6.4%, as I know other options that offer up to 8.0% per annum. Make sure that you do your homework well, in conjunction with your financial planner. You may even look at the possibility of a 24 month fixed deposit, where the interest offered is currently about 8.8%.

Depending on your marginal tax rate and your age, a more efficient investment may well be through a dividend income-type of portfolio. Ask your financial planner about this because you should be able to achieve an improved growth rate after tax compared to a money market. All in all, this will still be the relatively low risk that you require in a two year, short-term investment.

The time to buy Trump stocks

Trump pulled off a stunning victory. The Wall Street fashion this morning is to buy Trump stocks, sell bonds, sell gold GLD, -0.07%  and silver SLV, +0.29% and sell Clinton stocks. The probability is very high that you will lose money following Wall Street in buying Trump stocks and selling Clinton stocks.

Before discussing specifics, let us understand the background.

Let us start by carefully examining the chart of Nasdaq 100 futures NQZ6, +0.21%The equivalent ETF is QQQ, +0.46% I would have preferred to use a QQQ chart or S&P 500 chart SPY, +1.06%  because most investors do not trade futures, but ETFs do not trade all hours like futures.

Stock futures initially fell limit down 5% before recovering and even turning positive, as shown on the annotated chart of Nasdaq futures.

This up move is shocking Wall Street again as they were predicting further down move. Wall Street was wrong, and that by itself gives you a reason not to follow them.

Let’s dig down and take a look at what the Trump victory may mean for stocks.

Infrastructure stocks

Infrastructure stocks are flying sky high. On the surface, it makes a lot of sense. Trump plans to build a wall on the Mexican border and has been emphasizing improving infrastructure.

It is important to note that infrastructure stocks were also Clinton stocks. One of the favorite Wall Street theses was to buy infrastructure stocks as it was deemed a winning proposition irrespective of who won the election. As a result, these stocks were overbought going into the election and after the election, are becoming even more overbought. Furthermore, these stocks are expensive both relative to their own histories and also relative to their projected earnings growth rates even under Trump presidency.

Examples of the favorite Trump infrastructure stocks are Martin MariettaMLM, +11.57% Vulcan Materials VMC, +9.87% Granite Construction GVA, +10.90%Tetra Tech TTEK, +2.37% FLR, +10.16%  KBR KBR, +11.18%  , United RentalsURI, +17.12% AECOM ACM, +12.59% Terex TEX, +14.78% and ManitowocMTW, +14.22%

ld be avoided at this time and considered for buying only if there is a significant pull back.

Gold and silver

Wall Street was predicting gold to jump up $100-$200. Gold jumped up to $1336, nowhere near $100 gain, and then plunged to $1280. If you had bought gold on the Trump victory, you would be losing money right now. ETFs of interest are GLD and SLV.

A small position in gold and silver is fine, but taking on a huge position on Trump victory is not supported by hard data at this time.

Presidency may prove beneficial to luxury real estate

Donald Trump’s triumph in the U.S. presidential election was still sinking in by the earlier hours of Wednesday morning—but across the Atlantic, news of an upset led by discontented voters felt all too familiar.

Real estate experts in London and Europe who watched the presidential election unfold said in the near-term, Americans can expect a storm of economic and financial volatility similar to the chaos felt directly after the British vote to exit the European Union in June. But they differed over how a Trump presidency might affect luxury real estate markets in the long term.

“A Trump win will bring a property industry leader into the White House for the first time in American history. Without a doubt a Trump presidency will be pro-property and pro-real estate,” said Peter Wetherell, chief executive of Wetherell and a leading London real estate broker.

He said he thinks Trump’s presidency will greatly benefit the luxury real estate markets in the U.S. and internationally.

“It shows just as we had with the Brexit vote in the U.K. that American voters also want a change of direction,” Wetherell said.

Already since Brexit, there’s been an uptick in American buyers in London’s Mayfair and West End neighborhoods thanks to a depreciated pound, he said. And as Britons turn away from Europe, a Trump presidency could mean strengthened trade relations with the U.S.

“U.K. Investors are turning away from the E.U., so a Trump win opens the electrifying possibility of new U.S. and U.K. trade deals,” said Wetherell. “We are already seeing over the last four months an upturn in U.K. buyers looking at New York, Miami and L.A.”

And: U.K. home sales set to slide in wake of Brexit vote

However, Gary Hersham, managing director of luxury property specialists Beauchamp Estates, predicted that Mr. Trump’s victory may cause financial markets to crash further than it did overnight and weaken the dollar.

Markets started plunging Tuesday night on the news of Democratic nominee Hillary Clinton’s possible defeat. Futures for the Dow Jones industrial average fell more than 700 points, or 4%. Futures on both the Nasdaq and Standard & Poor’s 500 dropped 5%, while stocks were down about 2% in early trading.

But a devalued dollar would not be all bad news for some international investors. The weakened dollar would effectively strengthen the British pound, Hersham said. “It would therefore certainly help with pound-based purchases in the U.S.,” he said, particularly in cheaper luxury areas like Miami, where price per square foot is less than $1,000.

Failed to rally after Trumps win

unduhan-31Gold prices saw a surprise finish lower on Wednesday after Donald Trump’s stunning U.S. presidential win as investors muddled through the uncertainties raised by the Republican’s unorthodox approach to politics.

“Perceptions today may have little correlation with tomorrow’s reality, and the markets are reflecting this uncertainty,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.

“There’s no denying the very bullish short-term effect of a Trump victory on gold,” with the world concerned about the “volatile personality of Trump,” he said. “But this is not reason to buy gold at this point, and may mark an opportunity to lighten up on positions with an eye toward buying back once the fundamental economic trends take hold once again.”

Futures prices for gold GCZ6, +1.13%  had spiked higher by as much as roughly $64 an ounce, or 5%, as U.S. election results rolled in late Tuesday into early Wednesday morning. But on Wednesday, December gold settled $1, or less than 0.1%, lower at $1,273.50 an ounce.

“The ‘Trump factor’ has been overall less striking than many have been expecting, given the level of political and economic uncertainty implied before the result” of the U.S. presidential election, said George Cassell, senior pricing specialist at S&P Global Platts in London.

The dollar pared all of the sharp losses it saw in early Wednesday trading and moved higher against the euro “keeping gold prices in check, why profit-taking by gold traders would have been largely expected,” said Cassell. The ICE U.S. dollar index DXY, -0.24%  climbed 0.8% to 98.60 in afternoon dealings, putting some pressure on dollar-denominated prices of gold.

U.S. equities were also scoring strong gains as gold prices settled, drawing more attention away from gold as a safe-haven investment.

But at the same time, “the chances of a lift in U.S. interest rates has slipped to around 40% from above 80% Tuesday, which is significant for gold prices in the medium term, with a [Federal Reserve] lift largely priced into gold before the election expected to provide upside” to gold prices, said Cassell.

“Analysts are now largely expecting buying on the dips, rather than selling rallies, as policies become clearer,” he said.

Before the election, gold prices were expected to benefit no matter who was elected president, with a Trump win potentially disruptive politically and economically, and a Clinton win seen as inflationary—both of which might have contributed to higher gold prices.

Read: Why gold will rise no matter who becomes the next U.S. president

But now that Trump has claimed victory, Chris Gaffney, president of World Markets at EverBank, pointed out that the fundamentals reasons for owning gold have not changed much.