South Africa

4 weeks

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David Garrioch

XY ADVISER

Podcast

SUMMARY KEYWORDS

client, advisor, portfolio, financial planner, run, product, retirement, tool, success rate, cfp, industry, experience, years, months, money, restaurant, timeline, podcast, bank, financial planning

SPEAKERS

David Garrioch, Louis van der Merwe

 

Louis van der Merwe 

Welcome to the financial planners South Africa podcast, a show dedicated to driving the positive evolution of financial advice, specifically in South Africa to join a global community of financial advisors, sharing and learning with one another to drive the positive evolution of financial advice. Head to x y advisor.com. portfolio matrix is thrilled to bring you this podcast in support of our common passion for people and the evolution of wealth management, or global business links precision investment management, expert financial advice, partnerships and technology. Visual, interactive, meaningful, productive for values underpinning acid map, a financial planning platform loved by advisors and their clients. This episode is proudly brought to you by Alan gray. They say it’s important to live for today. Although that might be true. We can’t forget to plan for tomorrow. There’s a lot of left of all, Alan gray is an authorized financial services provider, visit www dot Alan gray.co today to learn how we build long term wealth for clients. Good afternoon, David. Gary, thank you so much for joining me on the podcast today. Hello, Louie. How are you? Great man. Yeah, so this podcast is all about the journey of financial planners mainly in South Africa. So I thought it would be great to share where you are at the moment, what you’re doing, what type of clients you’re working with. And then we can unpack a little bit about the more details of how you got into the industry and what made it stick that you still here. So if you don’t mind sharing where you are at the moment and the type of clients that you deal with, and just give us a little bit more insight.

 

David Garrioch 

Oh, absolutely. But firstly, Shannon say thank you so much for having me on the podcast. I’m very honored to be here. I’m a huge fan of your work as you know. And hello to all the listeners, I hope that people find value from, from my experience over the last decade and some change in the industry. And where I am currently, I am a CFP professional. I’m an executive at alpha wealth, which is a financial advisory business. That’s national run the Cape Town office, which is part of my day. And the balance of my day is a client advice facing sort of client facing advisor. And I’ve done a few qualifications. I did the edit the typical CFP route, the post grad and ballpark went through to the CFP board added the advanced investments and portfolio management at DFS, but found that largely, I guess, I guess average would be the adjective I would use there. And yeah, prior to that I had a an undergrad in economics, pretty happy where I am at the moment in terms of the firm. And in terms of sort of the progress we’re making. And in the advice space.

 

Louis van der Merwe 

Great. I want to spend a bit of time on wearing two hats. So what you mentioned is one hat is dealing with clients but the other hat is also running a practice or the office in Cape Town, how do you balance those two,

 

David Garrioch 

it’s actually more natural than you then you would think I think there is a self benefit. So if we if I run a better practice, or FAR Part of it management team that runs a better practice that comes through in my client experience and my client book. So I think first and foremost my passion and purpose and like ultimate dedication that’s to the client experience and the the client themselves. So it’s almost like self evident, the better I am at helping the practice and fellow advisors that sort of are in our business. And the more that that actually benefits my ultimate purpose of being a great client advisor. And so yeah, I get involved with a number of things like you know, different operational things like tech and HR and finance, at varying degrees and run with different projects. But ultimately, it’s there’s a bit of selfish purpose there I kind of see that when I implement x thing and it will help the business but ultimately it will it will filter down to my own life book. So balancing it is not an issue. There has been some you know, crazy work weeks and I’ve done I’ve done the crazy hours, weekends and the job trips to get things over the line. And what I do aim to do is I do specifically spread out referrals. So if I get a new referral from either a referral strategic partner or from a client, I will understand like a Assa T for the month and, you know, asked the client or the prospect of client, are they happy for me to see them in two, three weeks time? Because the worst thing I can do from our perspective is I’m, you know, fanatical about client experience, I would hate to drop the ball. So early on in an engagement with with the prospect. You know, you know, I’m a huge fan of sort of building rapport and trust and, and that early stage reliability, I think it’s quite key to do to to building a relationship with the client.

 

Louis van der Merwe 

That’s interesting. You mentioned there that you’re able and willing to refer clients out, would that be outside of the practice? Or would that still be within alpha wealth,

 

David Garrioch 

pretty much exclusively within alpha welfare, and really only if there’s something we don’t offer. So I will, you know, some of the advisors in our team that are building their books, and maybe they’re less busy than I am, I absolutely do pass on leads. And when that does happen, though, I’m always conscious of the relationship element, because if a client or a strategic partner of mine refers me a client, I know that they want me to handle it personally. So I will still attend the meetings, always attend the meetings, just for presence. And I will slowly transition the relationship across to the other advisor. This is really showing, I guess, respect to the fact that and I guess we’ll talk about it later, is that whenever refer when a client or a or a sort of partner, professional partner of mine refers me a client, there’s, you know, there’s, there’s, they’re taking a lot of risk in doing so. So I want to always treat it very, very seriously. And but yes, yeah, I mean, I train the advisors here. So I’m confident in their skill sets. And you know, this the simple, the simple thing is upfront that you can do to show reliability to a client. And as long as I’m always around, and I’m visible to that referee, referee, then yeah, it’s been, it’s been pretty seamless,

 

Louis van der Merwe 

that really does speak to that client experience that you’re trying to cultivate. What do you Where do you get inspiration from designing a client experience? Is this something that you notice when you’re going to a fancy hotel or dining at a great restaurant? Or is it just something that comes naturally?

 

David Garrioch 

And so I think the natural aspect of it, I think it varies from advisor to advisor. And I think it varies from person to person really is how attune are you to the, you know, the multitude of data points that you receive when interacting with someone. So I will, I will, I will pick up on cues as much as possible. And which is difficult, because if you’re focusing on the client, and what they’re saying, and ideally, I would like to have my paraplanner, or a secondary advisor in the meeting to actually also pick up on cues. And then we can, we can, I guess, compare notes after the meeting, to get a fuller picture of what the client experience should look like for that particular individual. Because every client is different. And some things are more important to class than others. And we want to tailor that experience each and every time. Inspiration definitely comes from a multitude of sources. And probably the one that I think is most exciting and engaging right now is there’s I think they want the best restaurant in the world called at 11 Madison Avenue in New York. And you can look up the the YouTube video on how they treat clients. I think it’s a five minute video on the restaurant. And in the restaurant, they have dedicated staff that are called dream weavers, that will do research on the guests prior to the guests coming through for their for their meal, and then they will create dishes. You know, for example, the one the one example that they give is this family was visiting from overseas to New York, and the waiter had because the culture in the restaurant is centered around client experience. The waiter had picked up in conversation. Now this is the best restaurant in the world, right? It’s super fancy, world class, expensive restaurant. But the guy was saying, you know, I’ve come we’ve come all this way to New York. And the one thing we didn’t even get to do is to take a New York hot dog, you know, from the street vendors. The the waiter picks up when it goes and tells the dream weaver the dream weaver runs out into the street to go find a hotdog stand and buy a few hot dogs and they bring it up to the shifts and the shifts, you know, cut it up or beautifully decorated nicely on a plate and the next course that came out there pause the whole service and the next the very next course that came out was this hotdog. And you think that how that centers a a feeling of connectedness to the restaurant and the experience. I mean that family will say that they went to the best restaurants in the world and maybe the you know the foreground was amazing, but no, no but it will be the fact The waiter overheard a little anecdotes and they are so so dedicated to client experience that, you know, they ran out to go get that hot dog for that for that, for that patron. So like things like that I collect whenever I come across things like that, or I’ll collect those and draw inspiration from that. And I think Yeah, ship that’s, that is the difference maker, you know, it’s not it’s not performance. I mean, we as you know, I’m very, so very fervent on the fact that I have no control over the performance of a client portfolio, that’s for the asset managers to do. You know, it’s, it’s really the experience we give them and that feeling of trust. And I’ve long believed that what we do as advisors is as important, if not more important than what a family doctor would do for for our family. And our clients ability to enjoy themselves, is largely predicated on their, their, their finances, you know, how they can spoil their kids or their spouses or their parents, or themselves, you know, or they’ve, you know, worked hard for 3040 years to build up a cash. pot, you know, and I always say, that’s a great responsibility, and it must be treated as such, you know, and anything we can do to be very good, technically great, it’s wonderful. But that can fall by the wayside, if the client experience isn’t great, if you don’t give a good client experience to your client, they can leave you and then they can maybe go to a different advisory firm that may not be as technically skilled, but maybe they have a better client experience. And the client therefore loses out on their technical acumen that you’re also trying to bring forward. So for me, it’s really a client experience. Number one, technical skills number two, but they it’s a close second pile, that’s

 

Louis van der Merwe  

a brilliant story, he knew what strikes me is that, for that restaurant, it probably didn’t cost them much to send someone downstairs to a hot dog vendor. So these are the kinds of things that we can incorporate in our businesses, if we share the same thinking around client experience at, you know, at a reasonable cost, just to create what Seth Godin would call a kind of a purple cow experience. Right? A really remarkable thing that clients would talk about for many years in the future. Yes.

 

David Garrioch 

No, no, I mean, I mean, can you imagine again, it’s, if you are winning, when I talk about two hats, I talk about kind of my purpose, hats, fulfillment, what fulfills me as an individual, but then I was struck with the commercial hat. And sometimes the commercial hat might come across as cold. But if you think about the amount of press and referrals to that restaurant, that that family would then make, you know, so the cost of that hotdog, $10, or $20, versus that family going back to wherever they were from, let’s say, they’re from Europe, and telling all the affluent friends that if you go to New York, the one place you have to go to is 11. Madison Avenue, you think a small investment of attention, plus $20 leads to however many 10s of 1000s of dollars in revenue. So often say that, because for me, the purpose hat, the performance hat is really about, you know, I love what I do. And I’m very lucky to do what I do, and to enjoy it as much as I do to do your drive. But it serves you commercially to be highly attentive to detail highly, you know, conscious of the clients experience of your service, it actually serves you commercially. So I’ve often sort of said a previous like mentor of mine said, just do the right thing, and the money will come in. So I don’t really focus on the revenue personally, which is obviously easy to say 10 years into a career. But I would say to any young financial advisors or financial planners that are listening that, you know, doing the right thing, and being earnest and, and chasing the delivery of a great client experience will almost always result in a commercial success down the road. That’s so true.

 

Louis van der Merwe 

I think the revenue comes over time if you are in the game long enough. Yes. And you know, maybe that leads us into talking about how did you get to stay in, in delivering financial advice, given a great experience for the last 10 years? Like everyone has a story where things have gone really south and it’s quite difficult to stay in the industry. So I’d love to just, you know, hear what your experience has been in South Africa in the financial advisory space.

 

David Garrioch 

Yeah, I know it’s bumpy, you know, my background. It’s it’s a it was definitely all over the place. And a tidy and I said there’s a very difficult space to get going. I started in 2000 and I think was fair 2011 and when I got my first when I first joined the industry, and You know, we can rant about this in terms of the profession that a financial advice profession needing to stand on its own two feet separate from the product manufacturers or the product providers out there. So I joined in 2008 it was like late 2010, early 2011 and the company I worked for was in a large insurance company and tired agent you know, I was waitering at the time I just finished my beacom still waitering didn’t know what I wanted to do had no clue no direction My parents are accountants. I did it become in economics, literally no, no link to accounts the other than a couple modules and finance here and then I looked at actually applied for a job at Department of Energy in Pretoria. This completely random no clue. No clue what I wanted to do. My mom lived in Joburg hostel in Durban. And a friend of mine who was waitering at maths was a financial advisor by day, which I mean, for me today. That sounds absolutely asinine. But because it was commissioned only that’s what he had to do. Yeah, you know, it was commissioned only, you know, so if he wasn’t selling policies, he had to wait to pay his bills. And yeah, I mean, it was it when I was 23. I think at the time, I didn’t know any better. So he said to me, oh, come come come to this insurance companies franchise, and sling it. And I had, I was like, okay, whatever, I just, I just fell into the industry completely out of chance. And my very first day, so I got the job. I mean, surprisingly, it’s amazing. It’s amazing. I got a license, and the job and I was this 23 year old waiter, you know, with with an undergrad. And I mean, to the right now, as you know, I mean, I won’t go into too much of a rant, but I just, it offends me, it offends me that I was allowed to give advice back then. But, you know, without any training, there’s no formal training, it was just pure sales. So I get put in this position. And the very first meeting I have with the managing director of that firm, and it was maybe 20, brokers there was to draw up a list of all my friends and family and I’m going to go up to them and she gave me one large said that people who love by life insurance in essence, go go, go, go to all these people. And I remember thinking to myself, damn, man, that’s never gonna fly with me. It’s just never gonna fly. Because my I’m very transparent, and my friends and family will see straight through me. So I was in this frat franchise, and I’ve always been pretty good with people and I, in other waitering actually did help a lot on that on that basis. I was always I was always comfortable talking to people. And but I decided to not to do that I didn’t, I didn’t go the friends and family route. I basically just cold called a cold call for the first like six months, just called are still waiting, but cold calling as well. And NFC, and I mean, phone 100 get 10 meetings, assignment clients, and I did that. I mean, I walked the street, the CBD of Durban. And, you know, Canvas buildings. And, yeah, I mean, just a lot of grind. A lot of a lot of I would say hard work, not smart work. But no one was training me there was no other than other than the insurance company themselves on their products. So we were this little force, this little broker force just going out there, very well versed in one product, and had a very simple little a funny Excel tool. And I’m just telling clients that they, you know, they need this product, and why this product has benefits are better than the next insurance company’s benefit. So I wasn’t doing much investment other than the occasional retirement annuity, recurring premium retargeted annuity. But again, you know, there’s the the commission and that and the sales targets was all if insurance sales, so I kind of bumbled along here for about I’d say about nine months, not 10 months, where I was convinced at the top because this particular insurance company is great for their marketing and their broker consultants, you know, had had us had us very, like very convinced that was this was the be all and end all of products. So when I say I was successful, I mean, I was selling a policy or two every month. I was and I was getting but you know, I don’t have to get past or live my life Pema. I bought some carry on some, you know, the rocky road was, you know, some months, I would mean I would have a lapse and then I’d be negative and I forget I forget the month but it wasn’t that first year, got a cold, got a prospect through a cold call, signed up a policy the very next month. A competing agent went there with their product and kind of undermined my product. Reverse the cancelled my product and put new insurance companies products. And I had a 17,000 Rand lapse in the very first net. And so there’s my first experience of a lapse at the top. And I started the next month. So it was October, I started October with negative 17,000 on my condition code. And I remember sitting there thinking, Well, how do you what do you do now? I mean, all the work I do in October will be to pay off. You know what I ended September and, and that that was one of the first moments where I was like, This doesn’t make any sense. This makes no sense that this is this a profession? Is this and what am I? What are we doing? Yeah. And you know, the good months? And I can, I can imagine that some young listeners on this podcast, and the Goodman’s you feel like a king and you’ve done well, and you’ve made 2030 grand, and now you you know, you’re having fun and going to restaurants and top of the world. But yeah, when those lapses come, and, you know, I wasn’t giving advice I was I was selling product, and it made me pause. And, you know, a few months went on after that, and I managed to dig my way out of that issue. A few months went on. And I remember thinking, you know, this particular product is, as I remember thinking, there’s so many products out there. This one is the best, you know, like how, how can, how can this product be the be all and end all when they are eight other large insurance companies and countless other asset managers out there? And I started to question, you know, the whole independence thing. So, then started interviewing, and I was very, very lucky to land a job at a private bank. And to this day, I still don’t know why they hired me, because I was maybe one and a half years of experience, I left I left that insurance companies franchise after about 1415 months. And I joined this private bank. I mean, again, I have no idea why that is still to this day, green as grass, but I guess I guess I carry myself a lot in interviews. And they needed a they needed a guy in between the wealth managers and the bank brokers. So they needed the guy that could do the life insurance for the clients of the private bank, because the big wealth managers and those private banks didn’t want to do that kind of business. And they needed someone to do the recurring premium investments. But they didn’t want to send the labor, they just wanted someone in the private banks, not not that not the branch guys, for whatever reason. And I remember joining them, and all of a sudden now, I went from one insurance products to non insurance products, because it was a private bank was independent. So there was no tire to any one particular provider, which is what I wanted, I wanted to be independent. And now at the time, he again, you kind of gravitate to what you what you, you know. So I just got stuck into the detail on that. And I attempted to attempted to understand all man company’s products. You know, back to France, I had broker consultants coming in and out of the bank every week. And yeah, it was it was crazy, it was just far too much. And one of the things that I remember very clearly and this is we can talk to me almost exiting the industry was at this time is our same at the bank, also no no salary, they gave me a little loan, I think the loan was like, they would pay like seven and a half grand a month basic for six months, you know, and then I had to repay that. And now all of a sudden, I went from being very confident with one product, extremely confident. And it’s a it was an early realization, I was like 24 or five, that actually confidence selves, you know, unfortunately, because you can be confident with all the right intentions for the client and all the right skills. But you can also be confidence for yourself. And you can also be as an as a broker and advisor, you can be confident and highly convicted, where your goal is maximizing your revenue and not the client’s interests. And clients will never be able to pick up the difference. So they just look at you and they go, you’re the expert, and you’re telling me that this is the right thing for me. They won’t know your your heart in those early engagements and went from being ultra confident to not confident at all because all of a sudden, I didn’t know which was the best product I couldn’t I couldn’t make heads or tails of what to do. And I realized at that time, and obviously I’d known about the CFP program, you know, since I joined the industry, but I remember that time that I said I need something to hold on to here that I can say is my this is my value. I’m bringing value in this domain. Before it was I’m an expert in this insurance company’s product and and I believed so wholeheartedly that it was the best thing for the client. That was shattered the minutes I became independent completely shattered. And I realized that my value was not to be a effectively a broker consultant who would see clients. My value was not I needed to actually give advice and be a financial planner and be skilled in those areas. But I’d never been trained. Never, not a single session on that day training I’d ever received as product related training was, I think, a big problem for the advice profession. It’s great for the life insurance companies and the product manufacturers because they’ve got an army of, of brokers selling their products. But it’s not good for the profession of advice. Yeah, completely flooded. My sales plummeted, had this loan to repay, it was kicking mass. And I was very fortunate to have my older brother Cover me because I went to interviews, I went to an interview to be a broker consultants at that same insurance company went to a trading platform for an interview. And I was like, literally a smidge. Because all I knew I just needed a I needed a basic salary 10 grand a month or something just to cover my costs, because I was literally at my wit’s end, my, my parents, unfortunately, aren’t financially well off. And my brothers always done very, very well for himself. And I went to him and I said, Listen, I’m I’m enrolling in the CFP program, the bank is paying for me to do the program, I believe that they there is a future for me here. And I need to stay in this private bank, because it is great for my CV. And I just need to get over the next sort of two years, somehow. And then he covered before, like, you like, cover me for that. I want to say like, six to nine months, you know, just you know, very generously, and it kept me afloat. And the more I replaced my daily proposition with technical skill as a financial planner, from being technically proficient product reseller, my confidence started to grow again, you know, and you know, if you spend enough time in a bank, you know, you start to develop relationships with the bankers and the lenders and the stockbrokers. And the lead flow does come. And I was lucky that, sure, I could breathe, because my brother Kevin, was my stopgap and. And I was doing my CFP, and I was I was, I was bringing those skills into my meetings night each and every time. And, and I was lucky, I started, I had a, for the first year and a half, I didn’t, I had a sales manager, who was not a financial planner himself. And then he he was replaced by a very technically skilled, you know, advisor. That was a head of the fiduciary division at the at a point. And he was a very, very good wealth manager and advisor, and I was lucky. So I’m talking about like, my three years into my career now. And like 26, may 22 2016. And the scar took me under his wing, and, you know, made me do all the grunt work, which I hated at the time. But, you know, I look back in hindsight, which was great, and just taught me the ropes of how to advise clients. And it was about advice, say nothing through his product. And he was the, you know, he was the guy that was helping me translate my kind of like weekly, newly formed financial planning skills under the CFP over the post grad ballpark, into real world client advice, and are still in commission. You know, I paid off that debt. And I was still living on policy sales, you know, from time to time, but it was becoming easier and easier. Because I’m three years into my career, I’m getting an unfortunate to be getting I have built rapport with, you know, centers of influence in the bank, and I’m getting a couple leads here, and they’re still not making jewelry in the laptop, but I’m being enough, I’m doing enough to, you know, live my life and keep my head above water. And pay my brother back and all those things. And yeah, I slowly started to form my value proposition as a financial planner. So still not, I would I would say still not a holistic advisor yet. But as Okay, cool, I can do the math, and I can find you the appropriate products to deliver on that math. And yeah, I mean, when I say I was inches away from leaving the industry, I’m not joking. I was in interviews and interviews at anybody who could give me a salary. And I look back and I think, sure, I would have I would have really regretted that I would have really regretted leaving you know, considering where I am now. Yeah, so yeah, I guess you would you want to hear about the balance of my moves. I mean, that was that was really the crucible. I mean, it was touching go for a good year there a year and a half. You know, from there, it was great. From there, my mentor and who was the regional head of advice. We saw that I was progressing with my CFP and he put me on to a small basic salary. And all of a sudden now I had to say Plus, I was servicing in the the recurring premium needs of the of the private banks clients and their life insurance policies. So the revenue started to roll, the revenue started to come in. And again, I’m not talking hundreds of 1000s, or millions or anything, it was just coming in and was covering my costs as a, from a personal perspective, but it was also covering my salary at the bank. So they were happy. And I was just taking over. And I went from strength to strength. In that case, you know, and, again, from there, you just, now my confidence was around, you know, being a financial planner, you know, and we can talk later in my life. And, you know, my late 20s, early 30s, and I’m 34, you know, my value proposition is, I think evolved to a point that I’m very comfortable with, it’s not so much the math anymore. So even that it’s, it’s really, it’s the client experience. And underneath that, knowing that we, at our firm, and at least at my desk with my team here, we are striving to be the most technically proficient advisors, we can be in a global best practice perspective. But that’s been, you know, I would say, to any aspiring young advisor or financial planner, you know, find your Find your passion and find your, what you believe in, and hang on to that because their value proposition is really what what, quote, unquote, sell you to the client. And help you help you, you know, generate revenue. Unfortunately, you can’t do anything in this world of that revenue, right? You can’t even stand the industry, if you’re not making any content in industry, you’ll get fired, or you’ll have to go somewhere else to find a job. But the first three years is the toughest I find the first three, yeah, the first three years, I’d say it’s, if you can get over that hump, you know, and you can get into the CFP program, I would say that, get through the first three years, four or five is still tough, but from years, five onwards, look for mentors, look for coaches, listen to podcasts, you know, find Louis on LinkedIn. And you should be okay.

 

Louis van der Merwe 

You know, what a what a journey you’ve had to get here. And, you know, the things that stand out for me is like what you just mentioned that what a difference that mentor made in your life. And what actually just your own internal focus, how that change brought about you being able to change in the industry, you know, the things around you didn’t really change, but it was your mindset. Because oftentimes, we feel like, Hey, I’m, I’m not in the bass player, so just need to move to another company, or I just need to be remunerated differently for it for that to be able to change where you actually took the other approach to say, what can I change internally, and then, you know, still stay in the same place, but actually grow where I am, because no sales skills aren’t necessarily a negative thing. It’s just how they are applied in the industry. And two years ago, there wasn’t a lot of paid paraplanning jobs on the market that we can step into, because I was in the same boat, we started out at the same time. And it’s, it’s nice to see that there are financial advisors that could stick it out. And I want to share an echo what you saying it is tough stuff and surround yourself with the people that can support you be at financially or emotionally or intellectually, so that you can get to a point where the client becomes the center focus. I want to shift a little bit to, you know, you mentioned that you’re moving away from the technical and more into the experience, and we’ve unpacked the experience. But I know the technical part around your planning is world class and want to unpack a little bit, the kind of things that you’re doing in terms of retirement income projections for your clients, because that’s something that I know you and your team have a great passion for. If you don’t mind just sharing with us a little bit your thinking around what is missing with the traditional income projections that we give our clients and how your purchase different,

 

David Garrioch 

ya know, with pleasure? Yeah, the the, I believe that a great client experience, you know, sits above technical skill, but, you know, without the technical skill as a pillar, you know, you’re not going to give a good class experience, right? I mean, you can’t do a back of the envelope back of the cigarette box financial plan and pick a fight and and, and hoy and and yes, maybe you have a great experience, but you the the technical skill is fundamental to us. And I’ve got a particular shout out to ran analysis with every designation under the sun advisor in our team who’s particularly academic in the space and I’ve piggybacked off his, you know, insatiable appetite for research and building out our process. So, ultimately, if we can squeeze out more lifetime income for a retiree, you know, is that a better experience for the club Absolutely right, if we can squeeze out more laugh for a person. And when I say laugh, I mean an ability to enjoy their laugh through the proper use of their money. You know, to quote Dan Ariely, the behavioral finance scam, and, you know, then we are going to deliver a better client experience that when we can show them that they can sustainably maintain a level of spending through us optimizing their retirement income strategies. So when I say optimize, optimize the things that we can control, the things that we can’t control, we can’t write things we can control, you know, I would go to that Vanguard advisors alpha series. If anyone’s listening on this particular topic, I would really highly recommend, it’s probably the best thing I’ve read in many a year, it’s called putting value to your value, which is a 2016, sort of quantitative analysis on the seven areas that Vanguard put forward as to where financial advisors can add genuine alpha, so we call it advisor or they call it advisors alpha. So we contrast investment alpha. For the asset managers, they look for alpha above the benchmark or whatever benchmark that they that they measure themselves against, for advisors on say, Well, you know, there are several areas that we can tangibly control to squeeze out more return. And more return or more efficiency means essentially more capital and income for a client over their life. And I think that’s really going to generate a better client experience. So what we do is just read everything and listen to all the podcasts we can So Steve Sandusky and Michael kitsis. And it gets his call and all those podcasts and and you know, they’ll they will interview guests, and we’ll you know, we’ll pick up on a guest who’s written a white paper, and we’ll find a tool online. And we’ve, we’ve looked at everything, you know, the, you know, the black life centered financial planning with Paul Armisen, and much Anthony, we love that as well. So, yeah, there are people that have come before us, and they’ve done the work. You know, so one of the one of the one of the gentlemen that we, you know, read a lot from and use his tool is Abraham, aka Sania, from the timeline app in the UK, we are yet to find a cashflow modeling tool that is anywhere close to being as good as that tool. It’s inexpensive, it’s they’ve got sa focus, they’ve got sa sort of data in terms of asset classes, and inflation, etc, etc. And I would say that where the industry falls short, is that the bulk of the financial planning tools, even new tools that are currently review, you know, a new tool came across my desk recently, and I was asked to take a look at it, my my CEO, was still using deterministic modeling. And the difference between deterministic modeling and Monte Carlo simulations is that is that deterministic modeling is assuming a linear return profile. So if you plug in, I expect the portfolio to do inflation plus five, and then you set your inflation assumption at 5%. And then you say, well, fat fat, so that’s 10, you’re just assuming a 10% annual return in a linear fashion, which is every single year for the entirety of the term that you set. So if you say, Clyde retires at 65, and dies at 95. So for 30 straight years, you’re going to do 10% Manama, I’d love to find a portfolio that can do that. And Sam, yeah, please, with no volatility, you know, we’d be wonderful, you know, I’d use that for every client. But it’s just that’s not reflective of reality. So whenever I do any modeling, that the phrase that I use, with training para planners and advisors and alpha wealth, or just with my clients is that I want to get to as close as being reflective of reality as possible. So we know that returns are lumpy, and they come with varying wonderful towns, and we can’t tell the markets and it’s proven fact Can I tell you the markets? So what timeline allows us to do, there’s many, there’s many Monte Carlo simulations out there. I mean, I know that portfolio matrix have a wonderful tool in wealth explorer and their cash flow modeling, sort of tab and they’re in a very cool so wealth explorer tool for advisors. But why are we locked timeline is that they will take certain retirement theory from the world’s best thought leaders on the retirement space. So Benjamin and kitsis and Professor john Garten and a whole bunch of guys, I think, if I mistaken you had enough blood sheets rules out there, but they will, they will. Well, that tool will allow you to toggle things lack, you know, for example, there’s one rule called the Garton inflation adjustment, which you can set on the actual cash flow model. So you’re modeling out that clients income draws against their portfolio for 30 years, or 40 years, or whatever it is. and current tools as Africa will only allow you to put in a expected return. And it’s linear. So every single year from year one to year 30, every year, it’s 10% per annum, and there’s no volatility input. So you can’t put the standard deviation of the portfolio, which is just not it’s nonsensical, and it’s not reflective of reality. And then you kind of set a annual increase on the income. And that assumes that incomes increase for retirees every year, at five or 6%, or whatever assumption is, which is just which is just, it’s just contrary to the research. So Tom, Lan, and Abraham, aka Sonia of Tom that put out a recent white paper that really just proves, you know, the data shows and there’s hundreds of 1000s of of retirees that were surveyed and, and in the US, that retirees enlist, as they get older, they spend less, the kind of thinking is they spend at inflation minus one for the first 10 years of retirement, inflation minus two for the second 10 years, and then back to inflation minus one for the last 10 years. And their little uptick, you know, typically isn’t healthcare, but even there to start to be debunked, that even even the healthcare increase, what they’re showing is actually being crushed, subsidized by the activity, decrease activities, decreasing the spin, there are others decreasing. So that’s being taken up, the slack of that has been taken up by the increase in healthcare at the older, so 85 to 95. In a decade of, of life. So where we’re timeline is wonderful is we can say, Well, we know that what is the closest to being reflective of reality, so we can say we can put them gardens inflation adjustment, which, you know, it’s a slightly different rule, where it says, In the years with a portfolio is negative, no increase on your income. And that’s a rule that most clients can come can really can really wrap their heads around, say, okay, Mrs. client, if there’s a good year, and the portfolio is up, whatever 1% 5% 10% whatever it is, we will give you an inflationary linked increase. And if the portfolio is negative, we won’t give you an increase Is that okay? And I will overlay that with the some of the data that shows that you probably won’t need an increase anyways, you know, but in what we’re saying, and in the years that you do have a positive return on the portfolio as a whole, you’ll get an increase that’s inflation. And what the MonteCarlo simulation does is it runs 1000 simulations, 1000 scenarios of possible return outcomes and return sequences. And that’s why the standard deviation input is so important. So I’ll go into the portfolio matrix portfolio construction tool, just obviously, I all the listeners can know that we use portfolio metrics as our preferred asset advisor slash DFM and model portfolio provider. And the tool allows us to pull a net expected return when we build the portfolio. And it gives us a expected standard deviation of that portfolio over the long term. So we will put those inputs into timeline, and it will run 1000 scenarios and it’ll say, what is the percentage success rates on this retirement plan? How likely is this client to run out of money and or succeed in retirement and sort of global best practices between 72 target at 70 to 80% success rate, so we target at just a bit more on the conservative side. And the higher the success rate, the more capital you need, essentially, so you can commit more capital to increase the success rate or you can decrease spending. So we ran with a couple rules there. So we said, well, what are the things we can control, we can’t control the expected return, we can’t control what we expect, we can control asset allocation. So we can go higher equity in the hopes of getting the risk premium. And that is higher return. But that can also go against you specifically in the first few years of retirement, you know, some of the listeners will may be familiar with the sequence of return risk that a retiree faces as they retire, that risk is greatest in the first five to 10 years of retirement. Now, we think that because those risks are very, very real, we want to take actually what we call minimum effective risk. So I don’t know if this is Dr. Wade file or Larry swedroe, that talks about minimum effective risk, but one of the two of them do, I think it’s actually swedroe and safety first as book safety first. Now, if we know that an increase in risk assets is no guarantee of higher returns, especially in the short term, the data will show you that in the long term, you should get higher returns which is true. But in the short term we run, we run the risk of a bad sequence upfront. So in the first few years, the client portfolio could be you know, a good example as I had a client retire in January last year, however many millions, I put the money in the market. In March he was down 15%. I had a client retire and I think they’ve made June last year. His first year is that black city. So matter of three, four months difference between their retirements and, you know, the first initial sequences to when they start drawing from the portfolio is hugely different. So there they are, out of those 1000 scenarios, those two clients on two very different paths. And the way that I just had a versus the way that are just type B would be very different. And the way that I can mitigate the risk for client, both of those clients because I can’t, I would never know no one knows when the crashes are coming or when to time the market. So the way that we mitigate that as well as by taking the minimum effective risk to make the financial plan work and get to that 80% success rate on the retirement income strategy, the things that we do before that the things that we can control are, how much capital do we contribute? Can we delay retirement? And can we employ what we call a dynamic withdrawal strategy. And Tom LAN allows us to deploy or employ a dynamic withdrawal strategy, because they’ve got this very cool Advanced Settings feature. And that feature, you can toggle, I think it’s like, five different inflation rules on the annual increase and five different spending rules, you know, we can you can really, you can really customize the portfolio’s cash flow model. And those are the things you can’t control. So if I tell the client saying, say, Well, you know, the Euro 62% success rate, the only way that we can get you to 80% is either by delaying retirement, you know, hoping for a good market sort of performance over the next year or two, you can increase your capital that you contribute to the plan, or you can decrease spending, or in retirement, you can have spending flexibility. So, using gardens inflation adjustment, you cannot take an increase in the years where the where the portfolio is negative. And you’ll see how that improves the chances and sustainability of the portfolio. One question I’ll just answer because I’m sure people always think about this and say, Why 80, not 100. And when clients ask me all the time, the reason why you don’t get 400 is because the if you have 100% success rate, it means that none of the scenarios, even in CAC scenarios, even in scenarios where the portfolio’s doing awful, you still got, you still got to make your retirement age of 95, or 100, or whatever it is. That means on the reverse, that means out of 99 999 of those 1000 scenarios, the client is dying with extra capital. And again, is that the proper use of their money for them to die with extra capital? Now, if you’ve carved off the legacy requirement for the family, and you’ve you know, you’ve you’ve got contingency portfolios and emergency funds, and this is your retirement income pot, its own separate need that is there to generate income and capital for your enjoyment of your retirement. The last thing I want his clients to do with extra money, I want them to maximize spending and maximize lifetime income. So how do we do that in a sustainable fashion without them running the risk of running out too soon. So we target 80%, that 20% differential, it’s not a 20% chance of failure, it’s a 20% chance of having to adjust the portfolio. So if you’re in this first 20% of scenarios, and we will see it because we look at the tool, and we update the figures, and we when we do the client reviews, we know where they are, you know, we can track where they are. And we can see that success rate dropped below 80. Now we start making tweaks. And we will make tweaks that’s when we can get them but we can keep them on that on track. Because actually took a snippet Hold on a second, I took a snippet of this read this to you. This is from the white paper that I read the other day by Abraham from Tom line. And it’s a very good little quote here. So this is from Bob Dan hausa of the CFA Institute. He said, report retirement portfolios can fail less than two ways. Firstly, living cautiously might leave too much on the table when our money outlasts us. But spending too much can mean running out of money before we run out of life. For me, the first one is what’s pertinent. Everyone’s worried about the second one, everyone is almost too conservative, everyone’s really worried about running out. I get that 100% get that but the math can help you solve for that and your and your ongoing advice and wealth management services to your client will help you mitigate that risk. The bigger risk are foreigners. Again, as he says yeah, living cautiously might leave too much on the table when our money outlasts us. So you can do your financial plan and save. If you want to live a certain way and whatever’s left over you can go to your kids or you can say I want x men X amount of money to go to my kids, you can actually carve that out. But I want my clients to under retirement income goal. We have five different goals that we target for our clients and retirement income is one of them. I would love my clients to you know pass away with zero left in that bucket in any as the legacy is taken care of and emergency funds are taken care of. And that’s all still fully fine. But the I want the the assignments income to go to zero. And that other day, that’s I would have done the best job possible because they would have just enjoyed the lab, they would have maximized their happiness, and I would have been part of delivering that for them.

 

Louis van der Merwe 

Yeah, and it’s what strikes me is that how brilliant is is that you’re actually showing them the value that you will add in the future by putting them in these scenarios to say, Hey, mister client, Mrs. client, when there’s a severe market change negatively or positively, these are the adjustments that will make and this is how it’s going to impact because oftentimes, as an advisor, you struggle with, you know, displaying the value that you add in the future. And it’s more about, you need to enter into this ongoing relationship so that someday in the future, we can provide you with value, whereas you shifted that to the inception of the relationship, saying, let’s commit to this now, so that when it happens, we’ll be there to assist you. And this is the impact that it’s going to make because we have the software and tools to show you.

 

David Garrioch 

Yeah, I like timeline because it’s quite visual. So. So we use our kind of tech stack and planning at the moment is Excel, portfolio matrix as wealth explorer tool. For really two, the two main things we use are the financial personality assessment, which is quite cool. And the portfolio construction tool because we need those expected return and expected standard deviation numbers out of the out of the model portfolios to put into timeline. And then we use Tom that app. Yeah. It’s they’re wonderfully visual. So Tom Madden wealth Explorer, quite visuals, it’s easy to show a client that without getting too technical, and bombarding them with too much technical detail, and most clients can look at a success rate of 80%. And once I explained to them, that by going higher than 80, you run the risk of having too much when you are, and not enjoying your life enough. They get it, they get it and there’s some great little, there’s so many great little images by you know, Carl Richards and gets this Michael kitsis. On, you know, the one that I like a lot is the the three phases of retirement from 65 to 75, as you’ll go go years, from 75, to 85, as your slugger years, and from 85 to 95 years, you know, go years. And again, I want my clients from 65 to 75, to really, you know, live, you know, they’ve still got the energy and the appetite to travel and spend and, and, you know, I’ve got a great story of a client of mine, who’s my chiropractor, and done very well for himself. And his wife was his receptionist, was there still he still practices a little bit. And he had never worked with a financial planner, he had he had worked with a he had worked with a broker or product oriented advisor. And it was always about markets. And he never understood the talk about the markets. He just he said he sees he just looked at the guy and he’s like, Oh, great, well, what did you say then? I mean, the guy worked for a reputable private bank. And he was just like, cool. And he was referred to me by a son because I work with the Saudis. It was a wealthy entrepreneur. And, and I didn’t know product, I just did planning, planning with them, they will show you the math. And I took him through timeline. And I remember his wife telling me once when I got there for a meeting, that he just doesn’t spend that doesn’t spend all this money and doesn’t spend and he’s still working. He’s still working hard and 75 years old, but a strong, very strong 75. And as well as 65. He and she told me, you know, we’ll walk we’ll walk in the waterfront, and she’ll say, oh, let’s stop for for a coffee. And he said, No, no, no, we’ve got coffee at home. Because he was, he was terrified of not running out of money for himself. He’s terrified of running out of money for her because she’s 10 years younger than him. So I spent time with him. And and, and obviously, I managed to communicate that so so she was a little bit upset because she he would never spend the money on her. But I’ll tell her, no, he’s doing that so that you don’t run out because you’re younger by 10 years. So he wants to make sure that you’re taken care of. So obviously, again, we talked about optimizing for risk and optimizing for costs and optimizing for tax. So those are these are the things we can control. But for me, one of the more rewarding little anecdotes of my career in the last year at least was when he we weaved everything across the portfolio was fine. It was a fine portfolio of foreign funds, everything was fine, but it was it was I think it was geared towards any financial plan it was it was really just risk profile plus products. And very, you know, cut and paste. And then when I did the planning and I showed him that he had like a 98% success rate at this current income draw as you know, we can we can we can live it up here we can push up, push up your spending and maybe a year later I started working with him and 2019 a year later through the crash and everything again, there was conservative portfolio they still had a pullback but you know, we’ve got ways to mitigate that he found And when you say that, you know, his wife has been driving the same car for 10 years, you know, can he afford to buy her new car. And, and this is, you know, this is the proper feet for this man, you know, to to spend and, and I said cool Give me two minutes went into the tablet to put the purchase price of the updated all the values of his portfolio, but the purchase price of the car, find it back and I said no problem and buy the car. And she was so chuffed. She sent me a photo, the big smile of the car. And she was so overjoyed in that city. And again, that’s power here. That’s That’s for me again, that’s what about the commercial happened, the purpose hat, you know, that really follows my sense of purpose as an advisor. And yeah, at the same time, I mean, she always refers me, she refers me to her friends All the time, you know, because her experience has been his an advisor that is not just sitting there talking figures to them, in fact sheets, which really, if there’s no place for me really to be doing that I should, if I really want to talk fact sheets and figures, I can just bring the asset manager to the meeting. But it’s all with planning and the last hours, you know, and unpacking the things we can control the estate planning their taxes, their spending habits, you know, what’s realistic, long term, and we believe our process is closer and closer, more reflective of the real world? How will people actually spend and that’s why we read everything we can on spending patterns or retirees and and then how do we reflect our planning, you know, it would be it would be actually prejudicing our clients to assume an inflationary increase for the rest of their retirements. And again, we want to be client first. And we want to maximize their happiness through the proper use of their money. And yeah, that’s that’s really it was that was the last one. I really enjoyed that. And, and and the tools help us get there, you know, and yeah, I think I think the essay, the essay space is limited and the tool sets. And we’ve had to kind of custom build our own little stack, you know, and we’ve had to, you know, Brandon’s had to build out Excel tools for us, you know, to fill the gaps here and there. And but we’re very comfortable with that process. Now. You’re running it for what, two years, and it’s very, very comfortable with where we are and the advice that we give on the back of that math.

 

Louis van der Merwe 

Yeah, I can’t think of a better client experience that experiencing an advisor that actually cares enough about you being able to enjoy your money, versus the advisor that would have walked in 10 years ago, having to convince someone to actually buy this product, which is the exact opposite. Yeah. And in South Africa, we tend to spend so much time around, only 6% of people can actually afford to enjoy retirement and spend their money. But the reality is the type of clients that we often see, sits with the exact opposite problem around not having the permission to be able or giving themselves the permission to enjoy the money after a lifestyle. lifetime of saving. Yeah, their lifestyle. What makes a lifetime of sacrifice? Yeah. And that’s what Davidson’s sorry, talks about kind of helping the client see that they’re okay, in showing them then they’re okay. Yes. It seems like you including that in the practice brilliantly.

 

David Garrioch 

Yeah, no, no, thanks. Yeah, and like I said earlier, that responsibility should never be lost on an advisor, or a paraplanner, or anyone in this industry is that, you know, if this was your money, you know, and you and you have no idea, you don’t know any better. I mean, you go to the doctor and you trust that they’re going to do what’s best for you, you know, the pharmacists, etc, etc. that you must respect that, you know, and I am, I’m fiercely passionate about that I don’t, I don’t care about the sales, I do not care about the brand. I care about the clients having a wonderful experience and enjoying enjoying their, their money to the fullest and in a sustainable fashion. And that has led me to financial success for myself personally. Yeah, and again, this is where I want to see the professional, the professional needs to go that route, where you need to be technically skilled, and you need to be hyper focused on helping clients maximize their happiness. Again, I keep quoting Dan earlier, but through the proper use of their money and proper means, you know, technical skill fee minimization, tax minimization, risk minimization, understand that very well. I want to see more paraplanner rolls out there and in the IFA space, you know, where the pair of hands get trained, I mean, I’m trading my parents in at the moment and, and exposing her to the skill sets, but then also exposing her to how we treat and talk to clients at a coaching level, you know, which I come to you for advice on all the time. And, yeah, the more the more we can do that, I think the more we’ll push the profession in the right direction.

 

Louis van der Merwe 

Thank you, David, I can’t agree with you more in terms of the role of the paraplanner in the future of financial planning, and driving that role as a fiduciary putting our client’s interests ahead of the product providers and the companies that we work for, as we wrap things up, where’s the best place for people to get hold of you if they want to have a discussion around financial planning? Or just any of the tools that you mentioned today? What would we based

 

David Garrioch 

from our perspective, I’m pretty good on LinkedIn. And I do get people reaching out to me on LinkedIn, and I’m always keen for a coffee or catch up over zoom or whatever. I’ve got an intern at the moment that I see who reached out through LinkedIn. And that one ends you that’s he finishes up at the end of May. So anyone, any young guy who’s keen or young lady is keen to really learn more, he’s passionate about the industry, I’m always open for coffees. So reach out to me on LinkedIn, it’s David, Gary UK, which is G a double r IO ch.

 

Louis van der Merwe 

Great. Thank you so much for being here, we’ll put a link in the show notes to all of the white papers software, your LinkedIn profile that you mentioned today. Sure. And as you know, this is all about pushing the future of financial planning in a positive evolution. And you and your team are definitely doing that. So I want to commend you for the work that you’ve done on behalf of your clients and the industry. And we’ll definitely have another session where you can explore some of the other areas that you’re working with. I think there’ll be a second part pretty soon.

 

David Garrioch 

So thank you so much. I’m very honored and privileged to be on your podcast. And thanks to the listeners for listening. It’s been a pleasure. Thank you very much.

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