South African Independent Financial Advisors Association March 2018 Forums

AGENDA 09:45/10:30 = Welcome by CEO Derek Smorenburg (SAIFAA) – FinaMetrica Alliance, ASISA Academy IFA Internship Program, Alexander Forbes IFA Project and the newly launched Living Hybrid Annuity in Partnership with JustSA, Roll-out of the Due Diligence Program, The Launch of the SA Unique Post Retirement Planning Program in partnership with the University of Stellenbosch Business School (PRPQ®) and the 2018 (PRPC®) “One Day Course #” 10:30/11:30 = Patrick Sheehy (Glacier) – “Optimising annuity strategies for a sustainable income in retirement ” 11:30/11:45 = Comfort Break

AGENDA (cont.) 11:45/12:45 = Hamilton van Breda (Prudential) – “Is the multi- asset low equity category appropriate for income-drawing clients?” 12:45/13:45 = Special Guest Speaker – Wouter Fourie (Ascor, SAIFAA Founder Member, PRPC® & PRPQ® Committee, & FPI Financial Planner of the year 2015/2016) – “Practical Case Studies on how to blend the Living, Life and Hybrid Annuity Client Journey as an IFA” 13:45/14:00 = Comments & Closure 14:00/15:00 = Finger Lunch & Networking Opportunity

WHY SAIFAA? Guiding Principles To promote the value of “independent advice” in a modern financial services market and the critical role of independent advisors in delivering this advice. To be recognised as a “key voice of the independent advisor community” with a mandate to represent this community with the regulator and the media.

WHY SAIFAA? Membership Eligibility Any financial advisor working for an independently owned Category I or Category II FSP “independently owned” meaning free to structure its business for the benefit of its clients selling any portion of the equity in the business to a product supplier will likely disqualify the advisor from being independent

MISSION STATEMENT Our mission is to be a key voice of the Independent Advisor in South Africa particularly relating to regulatory, media and product issues. We will help develop a sustainable independent advice industry that is relevant to the divergent needs of investors in our country and will strive to ensure that our members act in a professional manner at all times, with due care for the interests of the investing public.

EXECUTIVE COMMITTEE Chairman - John Kinsley Deputy Chairman - Alex Babich CEO & Founder - Derek Smorenburg Membership Director - Johann Kruger Finance Director - Harry Kalligiannis Dries du Toit Kagisho Mahura Bertie le Roux Chris Ellis (Employee Benefits)

_________________ Independently owned Australian business launched in 1998 Builds psychometric risk tolerance tests, supporting materials & methodologies Operational in 23 Countries, 1 200 000 tests+ , 5 500 + wealth planners, 7 languages Data used in 20 peer reviewed academic papers, over a dozen Master’s theses & 3 PhDs FinaMetrica’s founders have 80 years plus successes and experience in innovation in all parts of the financial services value chain Award Winning SYSTEM - 2014 Family Wealth Report Risk Profiling Award North America and 2016 New York; Wealth Briefing Awards 2014 Singapore and 2016 Switzerland; top ranked risk tolerance tool 2017 T3 Advisor Perspectives Survey USA 8 © FinaMetrica Pty Limited 2015

FinaMetrica Risk Profiling System _________________ FinaMetrica Risk Profiling System A psychometric test of personal financial risk tolerance – 25 question test; 10 question test A quantitative methodology for mapping risk tolerance scores to portfolio risk and a methodology for incorporating the test results into the advising process – gap analysis tool; risk and return guide Unique proprietary educational materials regularly updated to explain portfolio risk and return and to explain risk and return in the context of the investor’s risk tolerance Using the complete FinaMetrica system provide an accelerated in-depth relationship with clients - greater appreciation and commitment and improved retention © FinaMetrica Pty Limited 2018 10

The level of risk that is appropriate having in regard to: _________________ How to discuss the report with clients – positioning risk tolerance in the Risk Profiling Process The level of risk that is appropriate having in regard to: Risk Profile Resources Time Horizon(s) Risk Tolerance Risk Capacity Goal(s) Discussions around risk profiling often run off the rails because participants use the terminology but assign different meanings to the same concepts For me it is vital to first clarify the meaning of the different concepts and then how to unpack them In my educational sessions with institutions and financial planners I unpack risk profiling as follows © FinaMetrica Pty Limited 2018

Risk Profile Parameters and FinaMetrica _________________ Risk Profile Parameters and FinaMetrica Risk Profile Risk Required Risk Tolerance Risk Capacity How much risk you need to take. The risk you need to take to reach goals from resources available. Also risk associated with return required. (Financial factor) How much risk you can afford to take. About the ability to sustain negative events without derailing plans (Financial factor) How much risk you prefer to take. (Psychological factor with financial implications) Three Different Risk Parameters Risk Profile is the level of risk that is appropriate having regard to these three aspects of risk © FinaMetrica Pty Limited 2018

FinaMetrica offer to SAIFAA members _________________ FinaMetrica offer to SAIFAA members 30 Free Trial with access to full system functionality 20% discount on annual membership fees for SAIFAA members - FinaMetrica/SAIFAA alliance Workshop comprising of an online demo of FinaMetrica system and full functionalities - how to discuss the risk tolerance report with clients - how to use the gap analysis tool - the risk and return guide explained - how to set up and link your own model portfolios to the FinaMetrica risk tolerance score Workshops to be held in Johannesburg, Cape Town and Durban for groups of 5 or more trialists © FinaMetrica Pty Limited 2018 13

IFA Internship Program… What do you need to know? 23 March 2018

? What is the internship program about? What is the 10-day course about? Experience so far? WIFU?

What is the internship program about? An opportunity for high potential, early career black individuals to get experience in selected IFA practices   Johannesburg Cape Town Durban

What is the 10-day course about? IFAs... Financial markets, investment theory and legislation Dominant themes (RDR, consolidation, fee transparency, fintech, passive funds, alternative strategies and the DFMs) Industry value chain Asset managers (large, boutique, alternative) Customers (segments, needs, perceptions…) Perfect Practice (Pty) Ltd Work-readiness “Selling” and personal effectiveness …ABC.

…designed to educate, inspire and prepare the interns for their first year of formal work!

Year 3…. 70% retention 30 interns per year Experience so far… Year 3…. 70% retention 30 interns per year

WIFU

THE “CRISIS & RUIN”

“Post Retirement Planning Qualification” (PRPQ®) In conjunction with the University of Stellenbosch Business School   Our SAIFAA PRPQ® Committee (Wessel Oosthuizen, Wouter Fourie, Dries du Toit, Janet Hugo, Derek Smorenburg & by invitation Gerda van der Linde from IBF/FinaMetrica) is in the process of planning a South African First Formal “Post Retirement Planning Qualification (PRPQ®)” in partnership with the University of Stellenbosch Business School (USB) at a proposed NQF 7 level that will be targeted for roll-out during February 2019. We will be registering the program title during 2018 (PRPQ® – SA)

“2018 Introductory Post Retirement Planning Course(s)” (PRPC® ) We are planning a series of “One–Day” PRPC® Member Only “Introductory” Courses is being Planned that will focus on the following subjects:- Practical Skills Enhancement such as the Psychology of dealing with the Elderly (Retirement Networking etc) How to engage with the Family during the post- retirement client journey (what role should they play?) Powers of Attorney, Curatorship’s & Legal Costs

“2018 Introductory Post Retirement Planning Course(s)” (PRPC® ) – Cont. Retirement Village Accommodation, Life Rights and Frail Care Costs (Dementia, Parkinson's etc) Life Expectancy/Longevity Suitable Risk Profiling, the dilemma of the post retirement person(s) is not only a financial of product dilemma but also a behavioural one. How & what IFA fees should be charged (is “pro bono” an option)

“2018 Introductory Post Retirement Planning Course(s)” (PRPC® ) – Cont. Leading IFAs & Investment Product Providers Case Studies including “What LL&HA Options & Solutions” to be considered How should SAIFAA Members prepare for the being Launched “In-Fund” Retirement Funds Options that will be offered by Councilors to all Fund Members? Delegate Debate, Discussion, Networking & IFA Sharing

THE NEXT “BIG” CHALLENGE We will start the process of reviewing the preparation of our 110 “plus” Members towards engaging their Clients who will be approached by Retirement Fund Councillors when they retire with LL&HA “In-Fund” Products at “Institutional Costs” as opposed to the “Retail Costed Options” available to the IFA The newly launched Alexander Forbes Living Hybrid Annuity in Partnership with JustSA is an excellent example of “next BIG challenge” all our Members will need to prepare towards building a set of solutions (Many more to follow)

THE NEXT “BIG” CHALLENGE (Cont.) Those who attended our Launch Forum in August 2017 will recall David Gluckman’s “heads-up” on Default Regulations and Living Annuities – issues to consider when retirement funds implement annuity strategies (“in- fund options”) that a week later became a reality where all retirement Funds will from March 2019 have to offer all retiring members an “in-fund institutional” option If you missed David’s presentation, please visit our website and view the SAIFAA August 2017 presentation – [https://saifaa.co.za/presentations].

THE SAIFAA DUE DILIGENCE PROGRAM We will be starting with the role-out of our “long awaited” Fund Management 28 Due Diligence set of Questions on behalf of our Members We will be requesting each Member to confirm which Product Provider they place their Clients and their Trust with (i.e. Allan Gray, Clucas Gray, Prudential, Prescient, Bridge, Marriott etc) Next week we start the planning of the Due Diligence Questions needed to be asked of all “Dedicated Fund Mangers” (DFM/DIM) We will be working with Glacier, MorningStar, Old Mutual, Fundhouse, and others

THE SAIFAA & THE REGULATORS We have engaged with the FSB on the “anticipated” RDR Investment Discussion Paper that will start to define the role and status of the Independent Financial Advisor in SA We shared an in-depth SAIFAA “Independent Survey” from 32 of our Founder members covering:- 1) Is the categorisation of being an “Independent Financial Advisor” important to your practice and your future? 2) Is the categorisation of your practice being titled in the Post-RDR world as an “Independent Financial Advisor” going to be important to your clients?

THE SAIFAA & THE REGULATORS (Cont.) 3) The FSB suggested that the main test of independence should be the extent of product suppler influence! Do you agree? 4) What about Practices that own a share in a Category 2 Product Provider, DFM, Fund of Funds, Multi-Manager, White Label etc structure where “they can prove from a Treat Clients Fairly perspective” that these arrangements are in the best interests of their clients as a result of “lower total costs to clients on investments” in addition to the “improved and great professionally facilitated FNA, CRA, SAA and TAA processes and services” as a result of these shareholdings! Do you believe they should still be able to be categorised as independent?

THE SAIFAA & THE REGULATORS (Cont.) John and I met with Caroline da Silva of the FSB in September 2017 and discussed the launching of SAIFAA & discussed:- “what is independence” black empowerment incorporation within SAIFAA (ASISA) We shared our “Independent Member Survey” with the FSB and received a positive re-action; Thank you too for sharing the very interesting findings of your survey on the use of the term "independent" by intermediaries, and related questions. We await the distribution of the RDR Investment Discussion Document so that we can add value from a SAIFAA perspective

THE SAIFAA MEMBERSHIP FORM We are asking that all to complete a Membership Form before the end of March 2018 This Vital Form includes Basic Personal & Practice Information as well as the following:- Practice Data including Number of Clients etc Assets Under Management (AUM) etc No of EB Funds, Assets & Group Risk (EBIG)

THE POWER OF SAIFAA NUMBERS At 110 Founder Members we will be Key IFA Association where we will be able to negotiate with the Industry & Service Providers as well as the Regulators to the benefit of all parties especially Clients Assuming that the average AUM per Practice is say R100/R500 Million then the total value of SAIFAA would be R11/R55 Billion! The Same applies to EB Funds with the ability to be heard by Trustees and Product Providers (EBIG)

SAIFAA DISCOUNTS & FORUMS We have already negotiated potential discounts with a wide range of Service Providers such as; FinaMetrica, Oyster Box, LinkTank and many other to be approached such as CRM’s, PI Cover, FPI, FIA, Masthead, Moonstone etc International Advisers’ upcoming International Investment Forum will be in Cape Town on the 22nd May at the Vineyard Hotel and Johannesburg on the 24th May at the Hyatt Regency Hotel to which you will be invited (More to follow)

SAIFAA TO-DO-LIST Due Diligence Program (Member Only Portal) Website Industry Calendar (Member Only Portal) Retirement Village & Frail Care visits to start the PRPC® & PRPQ®) Programs – Dates Plan Forums - “In-Fund” Options?) – Dates? EBIG CommitteeDebit Order facility Membership Drive Alliances A Service Level Agreement Template