Is The Face Of Financial Advice Really Changing?

[vc_row][vc_column][vc_column_text]In recent times there has been many disruptions in the financial advice space, but none more topical than that of the robo-advisor. What does the term robo-advice or advisor mean? Investopedia defines the robo-advisor as an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Robo-advisors (or robo-advisers) use the same software as traditional advisors, but usually only offer portfolio management and do not get involved in more personal aspects of wealth management, such as taxes and retirement or estate planning. The key to understanding the robo-advisor concept is the fact that programmed software based on algorithms are used to provide a solution to client’s need. The client will complete a set of questions online and the computer provides advice based on the answers given.

Let’s look at the positives and the negatives of the robo-advisor from both the advisor and client’s perspective:

Pro’s:

The likelihood that it will result in a better-informed decision by the client;
Possibility of lower fees per investment, i.e. cheaper for the client;
A quicker and more seamless experience for the client;
The facilitation of doing business for smaller clients;
The possibility that it will generate new business;

Con’s:

Clients’ preference, or need, for face-to-face contact with an adviser;
The financial planning process is for the most part about understanding a client’s needs, both tangible and intangible. Therefore the inability of the robo-adviser to properly understand the client’s needs;
Some clients’ lack of access to, or unfamiliarity with, technology;
After sales services is questionable once the client’s needs change i.e. the review process. The flexibility of the product is therefore still a question mark.

The Reality

The South Africa Investment Panorama (SAIP) conducted a research study in 2016 and the results were very interesting. Only 27% of the Independent Financial Advisers (IFA) group saw robo-advice as an opportunity, whilst only 19% saw it as a threat. Younger IFA’s are more likely to see robo-advice as an opportunity. This means that there is neither excitement nor a great concern over this new innovation. The research has also shown that robo-advice is on the radar of most IFAs, but the younger demographic is more optimistic about its potential.

The international trend has shown that even though there is interest, people still prefer the human connection. Large Investments have been made to build powerful tools like Nutmeg.com, Betterment & Convestor. The study, “Financial Planning in 2015: Today’s Demands, Tomorrow’s Challenges,” was conducted by the Financial Planning Association and polled 771 financial professionals. When asked how robo-advisor technology will be integrated, respondents discussed using it as a supplement to the advice they provide, outsourcing investment management to technology to focus on the value-add side of the business, creating a segmented service offering and targeting younger or cost-conscious clients.

So what do we make of this?

There is little doubt that the robo-advisor is a big part of the future of financial advice but there is doubt whether it will completely replace the face-to-face interaction with the client. The impact internationally has not been as great as anticipated and since we tend to follow international trends, there is a question mark about when the change will start to have a significant impact in South Africa.

We at Ultima Financial Planners value the personal interaction with our clients very highly and it enables us to understand the client’s needs and goals. This provides us with the pieces of a puzzle to be solved and we revel in the thought of solving these unique puzzles.

Therefore although we realise the changing environment, we still believe the face-to-face of financial advice is here to stay.

Sources: SAIP 2016 – Seeking Greater Efficiency, Investorjunkie.com & Investopedia.com[/vc_column_text][/vc_column][/vc_row]

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Wealth Is Not Just About What You Earn

One of the biggest misconceptions about money is that many people believe the more you earn, the richer you are. But a high income does not automatically translate into wealth.

If you spend everything you earn, you have nothing, regardless of how much came in at the start of the month.

The trouble is that many people like to spend on things that make them appear rich. Ironically, trying to look wealthy is one of the greatest threats to actually being wealthy.

Back to the future

Think about the fact that middle class South Africans earn significantly more today than they did 40 years ago. The household savings rate in the country has however gone from over 20% in 1980 to below 0%.

The simple explanation is that people have higher incomes, but they also have much higher expenses. In 1980 going camping was a good holiday. Children thought nothing of wearing hand-me-downs. Birthday parties were a cake and a game of pass-the-parcel.

Those would not be considered acceptable in most middle-class households today.

This is not to suggest that people should not be entitled to enjoy their hard-earned money. On the contrary, if your income allows you to live a good life, you should appreciate it.

Self-discipline

However, nobody can grow their wealth unless they spend less than they earn, and save a significant portion to cover their future goals.

That starts with having an emergency fund to ensure that a financial shock doesn’t completely derail you.
It means ensuring that you are investing at least 15% and ideally 20% of your salary for retirement.
And it also requires thinking ahead to what sorts of big expenses like a child’s education or a new car you can save for now to be able to more easily afford them when the time comes.

As Thomas Stanley and William Danko wrote in their best-selling book The Millionaire Next Door:

“It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.”

For advice on budgeting and how to organise your long-term savings goals, speak to your financial adviser.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

How Fit Are You Financially?

“He who has health has hope; and he who has hope, has everything.” (Thomas Carlyle)

Doing a financial health check can sound like a daunting idea. But it needn’t be.

Just checking a few simple things can give you a good idea of whether you’re financially healthy and on the right track. Here are four markers that you should look at annually to assess how you’re doing.

1. Is your wealth growing over time?

The first measure of financial health is your net worth. This is the difference between your assets (what you own) and your liabilities (what you owe). Your assets include investments, property, retirement savings, and cash savings. Your liabilities include debts such as a home loan, car finance, personal loans, and credit card balances.

How to assess your health:

If your net worth is positive (assets exceed liabilities) and growing over time, you’re in a strong position.
If your net worth is negative (liabilities exceed assets), but you are consistently shrinking the gap by paying off debt and growing your savings, that is a good sign.
If your net worth is stagnant or decreasing, that could indicate excessive debt or a lack of savings.

2. Could you handle a financial shock?

Life is unpredictable. Losing a job, facing unexpected medical expenses, or having to do urgent home repairs can happen at any time. An emergency fund acts as a financial safety net, helping you to cover these costs without going into debt.

How to assess your health:

A healthy emergency fund should cover at least three to six months’ worth of essential expenses (housing, food, medical aid, transport).

The best place to keep your emergency fund is in a low-risk account where you still earn interest, but can also access the money at short notice.

3. Are you in the debt danger zone?

A key measure of whether your debt is manageable is your debt-to-income ratio – the percentage of your income that you are spending towards repaying debt.

To work this out, first establish your gross monthly income before tax. Then check how much you are paying on debt each month, from your home loan to your credit card. Divide your debt by your income, and multiply that number by 100. You can also find debt-to-income calculators online.

How to assess your health:

Speak to a financial adviser for specific advice, but a general rule is that if you are spending less than 36% of your gross income on repaying debt, that is healthy.
If your debt-to-income ratio is between 36% and 50%, you are in the danger zone, and you should track whether this is improving or getting worse.
Anything above 50% is high risk and should lead you to taking urgent action.

Reducing high-interest debt as quickly as possible is a critical step in improving your financial health.

4. Are you on track for retirement?

Being financially independent means that you no longer have to work to sustain your lifestyle. You can live comfortably off what you’ve saved.

Of course, that doesn’t mean that you have to stop working. It just means that you have the choice.

For most people, this means being able to replace 70% of their salary. And a simple rule of thumb is that you need R1 million for every R5,000 you want to draw in income.

It’s difficult to know exactly how much you need to get there, but there are some useful targets that you can use. If you are saving over a 40-year working life, these allow you to measure your progress:

How to assess your health:

After 10 years, you should have saved at least 2x your annual salary
After 20 years, you should have saved at least 4x your annual salary
After 30 years, you should have saved at least 7x your annual salary
After 40 years you should have saved at least 12x your annual salary

Final thoughts

Assessing your financial health doesn’t have to be complicated. By looking at your net worth, emergency savings, debt levels, and retirement investments, you can get a clear picture of where you stand and what needs improvement.

Financial health is not about earning a high salary – it’s about how well you manage the money you have. With the right approach, anyone can take control of their finances and build long-term security.

To discuss your financial health, speak to us.

Could You Be Over-Insured?

“Too much of a good thing can be bad. After all, you can drown even in clear, clean, pure water.” (J. Grant Howard)

While long-term insurance is important in any financial plan, you may unknowingly be paying for more cover than you need. This is particularly possible if you have more than one policy in place.

This most commonly happens either when someone has both a personal insurance policy and a group insurance benefit through their employer, or they are required to take out insurance to cover a car or home loan. This duplication can lead to unnecessary costs without providing additional benefits, channelling money away from where it could be better used – for example, adding to your investments.

Understanding your cover

As a starting point, it’s important to understand how these different types of policies work.

Personal insurance is generally something you would take out with the help of a financial adviser. It is designed to cater specifically to your financial needs and circumstances.
Group insurance is provided by your employer as a benefit. These policies typically offer life cover, disability cover, and sometimes critical illness cover, often at a lower cost than personal policies due to the pooled risk across all employees. By their nature, they are, however, not personalised and may have limited payouts.
Insurance that you’re required to take out to specifically cover a loan will be a simple life insurance policy to cover the value of the loan.

Where overlap happens

You might assume that having more than one policy means you have double the protection. But this isn’t necessarily the case.

If you have a personal life or disability insurance policy and your employer provides similar cover or you take out another policy to cover a loan, you could be paying for unnecessary duplication. This can happen in several ways:

Life cover: If your group life cover already provides sufficient payout to settle debts and provide for your dependents, a separate personal policy may not be necessary.
Disability cover: Some policies pay a lump sum, while others provide income protection. If both your group and personal policies offer the same type of cover, the benefits may not stack as you expect. Particularly in the case of income protection, you can only ever insure a portion of your current salary. If you have personal cover for 75% of your earnings and group cover for 75% of your earnings, for example, they won’t add together. You will only ever get a maximum of 75%, so you are paying for unnecessary duplication.
Critical illness cover: If both policies include critical illness cover, check if they cover the same conditions. Having overlapping policies could mean you’re paying for cover you don’t actually need.

What happens when I retire or change jobs?

It is, however, important to consider that you probably don’t want to rely solely on group insurance. That is because it’s tied to your employment, and if you retire, switch jobs, or your employer changes their benefits, you may lose your group cover.

This can leave you without insurance at a time when obtaining a new personal policy might be more expensive due to age or health considerations. For this reason, while reviewing your cover, it’s important to ensure you have a sustainable long-term plan that remains in place regardless of career changes.

How to assess your needs

To determine whether you are over-insured, consider the following steps:

Calculate your required cover: Assess your financial obligations, including debt, living expenses, and dependents’ needs, to determine how much cover is actually necessary.
Review your existing policies: Compare the benefits offered by your personal and group policies to identify any duplication. Bear in mind that extra cover may be justified in certain instances, such as if you have high liabilities or many dependents.
Understand benefit payouts: Insurance companies may not always pay out in full if multiple policies cover the same risk.
Speak to a financial advisor: A professional can help you structure your insurance optimally, ensuring adequate protection without excessive costs.

The bottom line

Insurance is meant to provide financial security, but paying for duplicated cover can drain resources unnecessarily. That’s why you should carefully review your personal and group insurance policies to ensure you aren’t over-insured.

By aligning your cover with your actual financial needs and understanding where overlaps occur, you can strike the right balance between protection and cost-effectiveness.

To discuss whether your insurance cover is appropriate, speak to us.

Budget 2025: How It Affects You and Your Business

“… the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration.” (Finance Minister Enoch Godongwana – Budget 2025)

The tabling of Finance Minister Enoch Godongwana’s fourth Budget in February was marked by an unprecedented three-week postponement, following a deadlock around the original Budget proposal to increase VAT by 2%.

A revised Budget, finally tabled on 12 March, proposed a 0.5% increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026 – but the proposal was still not enough to satisfy most other political parties.

In his Budget Speech, the finance minister called the Budget proposals “a bold and pragmatic approach” to ensure the economy grows “much faster and in an inclusive manner”. He admitted that the economy has stagnated for over a decade, with GDP growth averaging less than 2%, while forecasts for medium-term GDP growth are a dismal 1.8%.

While the powers that be attempt to reach consensus on the Budget 2025 proposals, businesses and individuals in South Africa will find little support from the fiscus to survive these low-growth economic conditions.

This is evident from our overview below of the most pertinent Budget 2025 proposals. In a nutshell, the finance minister is trying to cover another substantial Budget shortfall by directly and indirectly increasing the tax burden on corporate and individual taxpayers.

Budget proposals that will impact you

The 0.5% VAT increases proposed for 2025 and 2026 will impact every South African, while disproportionately affecting lower-income households strained by high electricity costs, inflation and interest rates in a weak economy. To alleviate their impact on poor households, the list of zero-rated food items is extended to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals.
Personal income tax brackets will not be adjusted for inflation for a second year running. This means that, like last year, individuals who receive a salary increase will again pay more tax, and could be pushed into a higher tax bracket.
No inflation adjustments were proposed for tax rebates or medical tax credits – which once again translates into more tax payable by individuals.
Above-inflation increases in the excise duties on alcohol (6.75%) and tobacco (4.75 – 6.75%) are no surprise. This means that with immediate effect, the duty on:
- a 340ml can of beer increases by 16c
- a 750ml bottle of wine goes up by 29c
- a 750ml bottle of fortified wine goes up by 48c
- a 750ml bottle of spirits will increase by R5.97
- a 23g cigar goes up by R8.49
- a pack of 20 cigarettes rises by R1.04
- vaping products increase by 14c per millilitre
A one-year extension in the R370 social relief of distress (SRD) grant and above-inflation increases ranging from R30 to R130 per month in other social grants will provide minimal relief to the poorest South African households.
SARS has been allocated R3.5 billion this year and an additional R4 billion over the medium term to enhance its tax collection capabilities, so taxpayers can expect increased scrutiny and administration.

Budget proposals that will impact your business

The 0.5% VAT increases proposed for 1 May 2025 and 1 April 2026 will certainly impact all companies in South Africa’s struggling economy, with a disproportionately negative impact on the small and micro businesses that are crucial to economic growth.

VAT hikes directly raise the cost of goods and services, impacting competitiveness and profitability.
Higher prices resulting from the VAT increase will reduce consumer purchasing power in an already-constrained economy.
The VAT increase could trigger inflationary pressures, further eroding household incomes and potentially forcing an interest rate hike.
Two VAT increases over two years will also result in a significant administrative burden on businesses to implement the required changes to their systems.

Some good news

The general fuel levy and the Road Accident Fund levy will not be increased again this year, providing tax relief of R4 billion. However, the carbon tax on fuel and diesel will increase.
Property buyers will benefit from an upward adjustment of 10% in transfer duty brackets from 1 April.
A R1 trillion investment over the next three years in public infrastructure spending, focussed on transport and logistics, energy, and water and sanitation, should positively impact on the economy.
Besides the proposals detailed above, Budget 2025 included no other tax proposals or tax hikes, with no mention of a wealth tax or the National Health Insurance (NHI).
In a media interview following the Budget Speech, the minister said that if the economy does well, the VAT increase in 2026 may not be necessary.

How best to manage your taxes going forward?

There is (on 3 April) still huge uncertainty regarding the budget proposals. Expect a lot of political manoeuvring and perhaps some major changes in the days ahead!

The tax proposals eventually adopted, as well as other technical amendments in the 2025 Budget, will likely require professional tax advice.

If you have any questions about how the budget affects your investments, please speak to us.

Market Update: Tariffs, Tariffs, More Darn Tariffs

Since returning to office in January 2025, President Donald Trump has implemented a sweeping series of tariff measures – the latest of which is a 30% tariff on South African exports to the US. These decisions have sent shockwaves throughout the global economy and created significant market uncertainty.

At the latest SA Reserve Bank meeting, Governor Lesetja Kganyago summarised the current global state of play: “The world economy is experiencing extreme levels of uncertainty. Trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly.”

V is for volatile

The fallout from the tariff announcements has been wide-ranging. It has triggered volatility in currency markets, particularly affecting emerging market currencies. Developed countries’ stock market performance has sharply diverged, with European equities outperforming the US this year.

The widespread uncertainty has also weakened consumer and business confidence, resulting in many companies adopting more cautious approaches and postponing investment decisions, which could weigh on global growth prospects.

Copper prices are surging to record highs in anticipation of potential tariffs, and gold prices have reached record highs of more than $3,000 an ounce as investors seek safe-haven assets amid the uncertainty.

C is for caution

The tariff situation has prompted the South African Reserve Bank to keep interest rates unchanged at its last meeting despite cooling inflation. This reflects its concerns about the potential inflation impact of tariffs and their impact on the rand.

There will also likely be fewer future rate cuts than anticipated over the next few years as the SARB adopts a “meeting-by-meeting” approach due to the uncertain environment. As Standard Chartered economist Razia Khan noted, “The global risks are real – and the SARB’s caution is justified.”

The impact on SA’s growth will depend significantly on how the tariff situation evolves. If trade tensions ease, the effect may be limited. However, a full-blown trade war would likely have substantial negative implications for economic growth.

The bottom line

As long as tariffs dominate the global agenda, investors in South Africa can expect:

Elevated levels of market volatility
Periods of weakness in the rand, particularly if trade tensions escalate
Limited interest rate cuts
Challenging times for sectors heavily exposed to global trade

As such, diversification across markets and asset classes remains all-important, and investors should avoid making any rash, fear-based investment decisions. Though the world order may be completely changing before our eyes, unanticipated investment opportunities typically emerge amid maximum uncertainty, so be on the lookout.

If you have any further questions about how all of this affects your investment portfolio, please give us a ring.

When it Comes to Investing, Debit Orders are Your Friend

“The beauty of debit orders is that they make investing a habit, not an afterthought.” (Warren Buffett)

We’re all human – which often means being emotional and not consistently disciplined. Debit orders remove the emotion from investing and encourage responsible behaviour. With debit orders in place, you don’t have to choose between contributing towards your retirement or upgrading your Apple watch to include additional features you’re likely not to use.

Once you’ve consulted with us and we’ve agreed to the amounts, you should set up debit orders for various investments, including an RA, an emergency fund, and the much-needed annual holiday fund.

Little and often

Investing the same amount every month helps you stay on track and not be influenced by market cycles. We all know it’s a bad idea to try to time the market. Automating your investing via debit orders minimises the risk of losing capital if the market falls shortly after investing a lumpsum amount.

Setting up debit orders for your investments is not just a smart move, it’s also highly convenient. Once you’ve locked in the debit order, the process operates automatically. This convenience allows you to focus on other aspects of your life, knowing that your investments are being taken care of.

Rand-cost averaging

A further advantage of regular contributions towards your investments is rand-cost averaging. This concept means that when you use debit orders, you buy more units (of shares or unit trusts) when prices are low and fewer when prices are high. When you invest in well-selected investments, they will grow in the long term, so you benefit from a reduced average cost per unit. In simple terms, it’s like buying more when prices are low and less when prices are high – which should lead to better long-term returns.

And then there’s the magic of compound interest

The underlying principle of compound interest is that you earn interest on an ever-increasing amount of capital, as opposed to only earning on the original capital amount. This amounts to growth on growth for Titanic profits. Over the years, modest contributions to well-chosen equity funds can snowball into impressive sums, giving you a reason to be optimistic about your financial future. Little wonder Albert Einstein called compound interest “the eighth wonder of the world.”

Inflation is the real deal

According to Stats SA, the average inflation rate in 2024 was 4.4%, down from 6.0% in 2023. But it certainly doesn’t feel that way when you shop for food and other household essentials. Medical and education inflation rates are also higher than general inflation.

Inflation erodes the purchasing power of your money over time, so it’s important to ensure that your investments keep up with or exceed the inflation rate. This is why it’s so important you participate in your annual review every year so we can adjust your debit orders to keep up with inflation. Auto-escalations are not a substitute for a financial review, as your investment goals may change.

Let’s sum it up

Now that we’ve looked at how debit orders create savings discipline and leverage the benefits of both rand-cost averaging and compound interest, you should have a much higher opinion of these oft-criticised banking instruments.

If you haven’t already done so, please come in for a chat about using debit orders to secure your financial future.

Managing the Psychology of Uncertainty in Investing

“Our greatest motivation in life comes from not knowing the future.” (Thomas Frey)

Investing is an exercise in uncertainty. When you make any investment, you are taking a bet on the future.

This can be a hard thing to do. Markets move up and down, economies shift, and geopolitics can make everything feel unhinged.

At least, that’s how it feels in the moment. At any given time, there’s always something to worry about.

Yet, when we look back, things can seem very different. For example, if you’d been invested in global stock markets over the past 15 years, you would have done incredibly well. From today’s vantage point, it’s easy to say you made a great investment that has gone up in pretty much a straight line.

But, in reality, there were plenty of moments along that journey when things would have felt unbearably uncertain – after all, this period includes a global pandemic, wars in Europe and the Middle East, and five instances where the market fell more than 20%.

Making good decisions

Given how things have turned out, it’s easy to forget now the kind of anxiety those events caused at the time. After all, we now know that none of them permanently disrupted the upward trajectory of the market. As finance writer Morgan Housel points out, we don’t feel that stress, because we know how the story ends.

But for anyone navigating today’s market turbulence, uncertainty is all too real. South African investors have been watching global markets react sharply to every comment from the new American president, and even what he says about South Africa. This is hard to stomach, because we don’t know how things will turn out.

We have to, as Housel puts it, “manage the psychology of uncertainty”. Because, to some extent, all investors have to accept an unknowable future. The best we can do is look at what has happened in the past.

And what the past tells us is that the real challenge for investors is not just making good investment decisions, but managing the emotions that come with them. Those who are able to sit out the difficult times, stay invested, and let compounding work in their favour over time have always reaped the rewards.

Navigating uncertainty

With that in mind, here are some practical strategies to help investors navigate uncertainty without falling into emotional traps.

1. Acknowledge that uncertainty is normal

Market uncertainty isn’t a temporary phase – it’s a permanent feature of investing. There will always be reasons to worry, whether it’s interest rate changes, economic downturns, or political developments. The key is to recognise that uncertainty does not mean doom. Markets have historically rewarded long-term investors who stay the course despite short-term fears.

2. Focus on the long term

Short-term market movements can feel overwhelming, but they are often just background noise in the overall symphony. Looking at a long-term market chart shows a steady upward trend, despite numerous corrections and bear markets. If you’re investing for retirement or wealth accumulation over decades, what happens over the next six months is far less important than your overall strategy.

3. Tune out the daily noise

In an age of instant news and social media, it’s easy to get caught up in every market-moving headline. However, reacting to daily news cycles can lead to poor decision-making. Instead of following every fluctuation, focus on the fundamental reasons you invested in the first place.

A practical step is to limit how often you check your portfolio. The more often you look, the more volatility you will see.

4. Reframe how you think about risk

Markets moving up and down over short periods of time may feel disorienting, but it isn’t risk. The only real risk you face is not meeting your investment goals over time. Remind yourself that downturns are a normal part of market cycles, and of investing. Historically, markets have always rebounded.

5. Seek professional guidance

Investing can be overwhelming, especially during periods of heightened uncertainty. A financial advisor can provide an objective perspective and help you stay aligned with your long-term goals. If you find yourself second-guessing your investments frequently, consulting a professional can give you peace of mind.

The bottom line

Uncertainty is an unavoidable part of investing, but it doesn’t have to be a source of anxiety. By accepting that uncertainty is normal, maintaining a long-term focus, and using disciplined strategies, South African investors can navigate volatile markets with confidence. The key is not to predict the future, but to prepare for it – and to stay the course despite the inevitable ups and downs.

If you have absolutely any questions about your investment portfolio, please give us a call.

8 Things You May Not Know About Capital Gains Tax

“I’ll tax the street, I’ll tax your seat, I’ll tax the heat, I’ll tax your feet.” (Adapted from Taxman by The Beatles)

1. Why do I have to pay CGT in the first place?

Following a worldwide trend, South African authorities introduced CGT in 2001 to broaden the tax base. Before CGT was introduced, salaried employees shouldered the vast majority of the country’s tax burden, a situation that was clearly unfair. CGT also ensures that affluent citizens who buy and sell assets should pay more tax – as it should be in a country like South Africa.

2. How’s CGT different to income tax?

CGT is just one component of your income tax. When you sell an investment, 40% of the profit is added to your income and taxed at your marginal tax rate. CGT applies to shares, unit trusts, property, crypto currency and the sale of privately-owned businesses.

3. Can I avoid paying CGT?

The only surefire way to avoid paying CGT is by investing in retirement funds (RAs, provident funds, pension funds or tax-free savings accounts) as these don’t attract CGT. It’s impossible to avoid CGT by hanging onto an investment because when you die, the law deems your investments sold, and CGT kicks in.

4. But surely there are some exemptions?

Thankfully there are! Some big exemptions include:

R2 million CGT exemption on the sale of your primary residence.
Annual R40,000 exemption applies to all capital gains within a tax year. In other words, you can sell investments with combined profits totalling R40,000, without having to pay CGT.
R1.8 million once-off exemption for individuals over the age of 55 selling small businesses (valued under R10 million).
CGT doesn’t apply to the sale of personal items (cars, art, jewellery, small boats, light aircraft etc.), donations to approved benefit organisations, or proceeds from a life policy.
Non-residents only pay CGT on immovable property in South Africa.

5. What if my home is jointly owned or owned by a trust?

If you sell a home that’s jointly owned, both parties must declare the total gain to SARS. Both the profit and the primary residence exclusion will then be split. Both parties will also be able to utilise their individual annual exclusion of R40 000.

The primary residence exclusion of R2 million doesn’t apply to ordinary trusts but it can apply to special trusts (for example, for a person with a disability).

6. How does CGT apply when you trade for a living?

If you trade in forex, cryptocurrency, shares or property with the intention of making a short-term profit, your profits are seen as income and taxed at your marginal rate (generally higher than CGT).

7. What happens if your investment makes a loss?

If you sell an investment at a loss, you can’t write this off against your income. You can, however, use the loss to reduce how much CGT is payable. This loss can also roll over to subsequent tax years.

8. What happens when I die?

The only way around CGT is to invest in retirement funds because you are deemed to have sold any investments held when you die. After death, there’s a R300 000 exemption on CGT.

A quick disclaimer

All information was correct at the time of writing but some of the finer details may change after the budget speech is (presumably) delivered on 12 March.

The bottom line

While capital gains tax (CGT) can seem very unfair, why not look at it from another angle? At least it means you’re improving your financial situation year-on-year – which is not something many South Africans can say.

Of course, minimising tax is integral to financial planning, but you should never avoid selling an investment because you’re wary of CGT. We’d advise investing in retirement funds, holding other investments for the long term, and always working closely with us.

Market Update | SA and Europe Outpace the US Stock Market

Europe and South Africa have turned the tables on the US stock market, outperforming them in February and year-to-date due to signs of a slowing US economy, trade policy uncertainty and a rotation out of tech stocks. Trump-related investor optimism has dissipated, leaving the US stock market in the red since he took office.

While the STOXX Europe 600 has achieved an impressive 8.82% gain, and South Africa’s JSE All Share Index is nearly 4% ahead year-to-date (despite the budget speech postponement), the S&P 500 has managed to deliver a paltry 2% increase, with the index having lost all post-inauguration gains since Trump took office.

Several key US-specific factors point to why this may be happening:

US business growth slows: Surveys are capturing evidence of near-stagnant business conditions and declining manufacturing orders. Major retailers like Walmart have issued growth warnings, raising concerns about consumer spending.
Trade policy uncertainty: The Trump administration’s proposed tariffs, including a 25% duty on imports such as autos, semiconductors, and pharmaceuticals, have created market uncertainty. The president confirmed tariffs on Canada and Mexico will move forward on schedule in March after a month’s reprieve, contributing to market declines.
Tech sector rotation: Markets have been rotating out of AI and tech stocks, particularly after Chinese technology company DeepSeek rattled investors by introducing cost-effective AI models.
Trump political premium dissipates: After initial enthusiasm following Trump’s inauguration, market sentiment has cooled as implementation realities set in.

Blowing away the budget blues

In South Africa, investors shrugged off the short-term financial market sell-off in response to the unprecedented delay in the government’s annual Budget Speech, after the DA refused to sign off a proposed VAT increase. The All Share Index fell 0.8% on the day, and the rand weakened 0.9% to R18.57 to the dollar. However, analysts interpreted the events as evidence that the GNU coalition is working and markets have since recovered the lost ground, with the All Share Index almost 4% ahead year to date and the rand trading back at R18.47 to the dollar at the time of writing.

SA equities are presenting compelling valuations, which Rezco CEO Simon Sylvester describes as “offering better value than Nenegate, at a better than Ramaphoria opportunity with lower political risk.” The mining sector has rallied on higher precious metal prices, with gold approaching a landmark $3,000, after breaking record after record.

Bottom line

Despite all the global uncertainty and Trump’s disruptive macroeconomic and geopolitical decisions, market analysts generally believe the fundamental case for global equities remains intact. However, the performance divergence between regions may persist in the near term.

If you have any further questions about how all of this affects your investment portfolio, please give us a ring.

How to Keep FOMO Out of Your Investment Strategy

“Focussing is about saying no.” (Steve Jobs)

What is the point of investing?

In simple terms, there are only two reasons to invest:

To save for a specific goal like sending a child to university or taking a holiday. These are finite targets with clear time frames.
To achieve financial independence. This means building a pool of wealth that can generate a passive income stream so that you no longer need to work to sustain your lifestyle.

Investors who understand these goals also understand why fear of missing out (FOMO) gets in the way of a good investment strategy. In both cases, what matters is achieving consistent growth over time, not quick wins.

The problem with FOMO is that it encourages exactly the opposite – chasing trends and new ideas in the hope of a short-term windfall.

Where FOMO comes from

FOMO is rooted in the human impulse to compare ourselves to others. When we see friends or family making quick profits, we want a slice of the action. This can lead to impulsive decisions such as:

Chasing hot stocks or trends. The trouble with this is that investors can easily buy into assets that have already experienced significant gains. Often this leads to buying at inflated prices.
Abandoning long-term strategies. When investors see short-term opportunities, they may abandon their well-thought-out plans in pursuit of quick wins – which can derail their financial progress.
Taking on unnecessary risks. FOMO can push investors to take on higher risks without fully understanding the potential downsides.

The illusion of big gains

One of the most misleading aspects of FOMO is that those talking up an idea rarely share the full picture of their investments. They may boast about being invested in a particular stock that doubled in value, but forget to mention how much of their portfolio was actually invested in it.

For example, your buddy might claim they made a 100% return on a hot investment – but if that investment only made up 2% of their overall portfolio, the impact on their total wealth is minimal. This selective storytelling can give others a distorted view of the potential returns and risks involved.

This highlights the importance of diversification and managing risk. It’s crucial to remember that successful investing isn’t about finding one magical investment, but rather building a balanced portfolio that grows steadily over time.

How to keep the FOMO at bay

To keep FOMO out of your investment strategy, consider these practical steps:

Know your plan. The best way to avoid FOMO is to have a clear investment plan. This includes setting realistic goals, understanding how much risk you are willing to take on, and choosing an asset allocation that suits your needs.
Automate your investments. An effective way to remove emotions from investing is to automate your contributions through a regular savings plan (usually by setting up debit orders). Investing a fixed amount at regular intervals, regardless of market conditions, reduces the risk of making impulsive decisions.
Diversify. Diversification is a proven way to manage risk. By spreading your investments across different asset classes, sectors, and geographies, you reduce the impact of relying on any single asset’s good performance – or suffering from its poor performance.
Tune out the noise. Financial news and social media are major sources of FOMO. Limiting your exposure to these can help you avoid the temptation to react to every market move. The media loves to tell us how much the JSE or the gold price went up or down every day, but in reality this is meaningless information. What matters to an investor is long-term growth, not short-term volatility.

Understanding risk and reward

The source of FOMO is always seeing or hearing some recent success story. It’s human nature to want to participate in something that’s going well.

But the reality is that it’s almost impossible to rescue a failing investment plan with a high-stakes gamble. What definitely does work, however, is being an investor who sticks to a well-constructed financial plan for achieving financial independence steadily and sustainably.

To discuss your investment portfolio, speak to us.

Navigating Inheritance Conversations: Turning Tough Talks into Lasting Legacies

“A life of luxury sounds nice, but generational wealth sounds better.” (Unknown)

As the old adage goes: “The first generation creates wealth, the second generation preserves wealth, and the third generation squanders it!” Our goal is to prevent this.

If you’re fortunate enough to have created generational wealth, it’s extremely important that your heirs know about your hopes for the future use of your wealth. The conversation doesn’t need to feel as if you’re walking on eggshells. In fact, these chats can actually be fantastic opportunities to strengthen family connections, protect your money value system, honour the creation of wealth and pave the way forward for your family’s future financial security.

The very basics

Your heirs must know where you’ve filed your Last Will and Testament, Power of Attorney, and Living Will. (Your doctor should also have the latter on file.) Deceased estates can take a long time to finalise, so make a plan for your family to have access to funds in the interim – life policies, family trusts, and separate bank accounts are common recommendations.

Essential elements of a winning family constitution

Turning tough talks into lasting legacies doesn’t have to involve developing a family constitution. You could choose to have ongoing family meetings without any documentation. The principles could be included in your letter of wishes. But family constitutions can help to formalise your hopes regarding the wealth you have created.

If you decide to document your wishes, a family constitution should ideally outline the principles, roles, and guidelines for managing and passing down family assets. It’s all about providing a harmonious script to avoid the breakdown of family relationships.

Some of the recommended elements include:

The history of your career, which will assist in celebrating your hard work (and explaining how you built your estate).
A mission statement. Core values could include prudent spending, encouraging continued education, and gifting rules.
Measurable goals can be set for wealth preservation.
Give roles and responsibilities of each heir, making sure that they align with their respective skillsets.
Manners of empowering the next generation.
Family council rules to assist in making decisions regarding joint assets such as a holiday house.

Mastering the journey ahead

Developing a family constitution (or even just discussing your legacy plan) often starts with a group meeting with your advisor and a facilitator, a professional who is skilled in managing group dynamics and ensuring everyone’s voice is heard. The facilitator helps to smooth the way ahead and ensures that the conversation is productive. You may wish to share your Last Will and Testament at this meeting. The conversation should open the door for everyone and preferably be held in a ‘safe place’, such as a home rather than a boardroom.

After signing a confidentiality agreement, the facilitator could host individual meetings with heirs. Heirs may wish to express concerns about their inheritance confidentially, which they prefer not to share with the whole family. The facilitator could then draft a report to be shared with the wealth founder.

All the conversations should preferably balance the heart and the head and acknowledge emotions with empathy.

The early bird catches the worm

Remember to start the process early so that the constitution can be changed annually according to changes in circumstances. These may include revised priorities, the voices of additional heirs, changes in wealth, businesses, or family dynamics. Early planning is key to staying ahead and being prepared for any changes.

Involvement is the magic ingredient

The process works very well if it reflects everyone’s voice. Working together collaboratively ensures the document is respected and relevant, fostering a sense of unity and shared purpose within the family.

From tough talks to family triumphs

As your financial advisors, we can start the process and consult with the facilitator. We can also broach the topic with your heirs if you prefer not to be the first to bring it up.

Remember: when families steer the ship together, they strengthen the ties that bind and create legacies worth celebrating.

Contact us if you want us to assist you and your family in preserving generational wealth.

Evolving Wealth Part 4: Boomer Bucks, Key Financial Strategies for Your Golden Years

“A big lesson in life is never to be scared of anyone or anything”. (Frank Sinatra)

If you were born between 1946 and 1964, you are part of the Baby Boomer generation. This generation is known to be flexible and robust, having lived through many bulls and bears over the decades.

Whether you’re contemplating retirement or already ticking off your bucket list, here’s what you need to know about managing your money to make the most of life.

Same same, but different

As mentioned in our previous Evolving Wealth articles, it’s not safe to generalise about an entire generation. Baby Boomers are often split into two different groups with some shared traits:

The wise generation (aged 72–79)
This colourful group grew up during transformative times. They lived through the Space race, the hippy generation and the onset of apartheid. They are celebrated for their aspirationalism, uniqueness, and adventurous spirit.
The vibrant boomers (aged 59–71)
This subgroup experienced the fallout from the Vietnam war and the impact of sanctions and divestment as local and international opposition to apartheid grew. As a result, this younger generation of Boomers tends to be more questioning and realistic.

Despite these variations, the wise and vibrant boomers share some main characteristics, including:
- A dedicated and disciplined approach to their work. They are also goal-oriented and competitive.
- They like to invest in property, as it’s an asset class they understand. They tend to be risk-averse and often favour unit trusts. Boomers are more likely than other generations to use professional advice for their retirement planning.
- They appreciate travel and rich family experiences.
- Although they may be slower learners, they are unexpectedly tech-savvy and dedicate themselves to continued online learning.
- Regarding value systems, they’re loyal, respect authority and have a strong sense of civic duty and community involvement.

Navigating retirement in a world of rising healthcare costs

Retirement can stretch for decades these days, making planning beyond traditional company pensions essential. We highly recommend that Baby Boomers continue to work for as long as possible to accommodate rising healthcare costs and general living costs.

Mastering money moves for a prosperous future

Here are some other savvy moves for Baby Boomers to make:

Don’t skip estate planning
Baby Boomers often consider themselves invincible, but realistically, having all your affairs in order becomes more important the older you get. This includes maintaining a valid will (Last Will and Testament), general and bank powers of attorney and a Living Will. Also remember to check all the beneficiaries on your life policies.
Consider downsizing
Downsizing is challenging, as you may need to let go of many items that bring back happy memories. But once you’ve gone through the process, and simplified your life, you’ll feel a massive weight lifting from your shoulders.
Life or Living Annuity?
Deciding between a living annuity and a guaranteed annuity can be daunting. Each option has its pros and cons, so consult a professional to determine what’s right for you.

The bottom line: It’s your time to shine

You’ve spent your life working hard and thinking out of the box, and retirement should be no different. With careful planning, the years ahead can be some of your most rewarding. Ready to take charge? Please get in touch with us if you’re a Baby Boomer and want to discuss any of the above.

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73 Kariba St, Lynnwood Glen, Pretoria, 0081

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+ 27 12 348 1386

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+ 27 12 348 3706

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Physical Address:

73 Kariba St, Lynnwood Glen, Pretoria, 0081

Telephone:

+ 27 12 348 1386

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+ 27 12 348 3706

Email:

[email protected]