South Africa

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Dirk Groeneveld

XY ADVISER

Podcast

SUMMARY KEYWORDS

clients, people, work, financial planning, business, advisor, industry, planning, spend, life, paying, lifestyle, important, money, financial advice, fee, meeting, build, helping, south africa

SPEAKERS

Dirk Groeneveld, 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, Deb klinefelter. Thank you so much for joining us today on the podcast. It’s a pleasure to have yet you are well known in the industry to many someone that speaks their mind. So I’m really looking forward to today’s conversation.

Dirk Groeneveld 

Thanks, Louis. Thanks for the invite. I do speak my mind sometimes, but hopefully not to offend anybody.

Louis van der Merwe 

Yeah. So today’s conversation really, we want to unpack a little bit of your history, how you got into the industry, some of the interesting stories that you’ve shared with me, but also then focus on a little bit on your practice, you know, what’s working? What have you tried to to implement and where you see the future. So if you don’t mind just starting off us and giving us a little bit of a brief introduction to who Derek is,

Dirk Groeneveld 

surely. Well, look, my journey started nearly 30 years ago. As a what was a 23 year old. I finished school, done a marketing diploma, done my national service being overseas. And I got back home and my dad told me I needed to get a job. So yeah, I didn’t know what I was going to do. He introduced me to his his advisor, his broker at that time and the first company turned me down because of my age and the next company employed me because the the branch manager went to the same school as myself. Yeah, so I started off in a company called Southern laugh, which is eventually be taken over by momentum. And I started in the field division in those days, we had there were no computers, we had to write books. So we were sent to Cape Town for two weeks on a course learn how to do quotes, real time on the back of a cigarette box on a notepad. And and then we were sent out to Seoul in you know, all kinds of setting techniques and closing techniques. Yeah, so that’s where that’s where I started from the after a few years, I left and was asked to join a new business which had been started by an individual who had started who’d run a very successfully for financial planning or not financial planning a broking business and sold to a corporate, you starting something new. Unfortunately, after about three months, I worked out that the ethics the way of doing business wasn’t quite what appealed to me. So I had to leave and go on my own. And I was very fortunate then that a friend I’d worked with at Southern life, had joined another corporate and asked me to join her on the financial planning division, which are they in dead? Yeah, so I was into corporate and then about 2020 an hour 2000 2001 we had the RAND was taking a hell of a whack against your your harder currencies. We had the RT boom, which those in simultaneously almost collapsed. And it was up until then, it was at that time that I realized that as much I was trying to add value to clients are really, I was I was not I was simply an intermediary, pushing product for the big asset managers and large companies. And and I really felt worthless and I was considered leaving the industry, nothing against use car salesmen but I deem that as being far more honorable practice than I was involved in. And then I was very fortunate that I heard about a business called AIPAC which had been brought to South Africa by from Australia. Yeah, by Andrew Bradley. And, yeah, I flew to Cape Town and met with him. I told him what my issues were. And he showed me what they were about, which was concept, you can’t go to half style financial planning. It absolutely fitted what I was missing. And I flew back to Port Elizabeth the next day. And, and that was that one of the big changes was I had moved from commission to fees. And I did that immediately. So that was, that was quite an adjustment, I had to make a lot of personal changes in my, in my living standards, let’s say, the vehicles that drove the houses I lived in, and I had to do all of that, which which ended. I then a few years later then actually opened my own business. And client, Kay, which has now been running for going on 20 years now. I fully embrace lifestyle, financial planning. Yeah, and I suppose the rest is history.

Louis van der Merwe 

Oh, brilliant. That really is a journey. Can we spend a bit of time defining lifestyle financial planning to a lot of people listening to this, they might think, oh, but you know, I do lifestyle financial planning, because I ask my clients, what is important to them? How do you define? And more particularly, how do you explain lifestyle, financing lifestyle, financial planning to your clients?

Dirk Groeneveld 

Well, Louis, to be honest, I think it’s morphed and, you know, it’s one of these things that I think we keep need to get better at. And when we never get there. You know, initially, what was brilliant is that there was a, there was a model, you know, there was a tool we could use. We didn’t have to be fun pickers anymore. They were. They were fans, which were inflationary, targeted, the first ones in South Africa, in fact, which was about 21 years ago, 20 years ago. So So initially, it was about being able to basically do cash flow planning, as we know, today in a very, very basic sense. But then as you got into it, it became more and more about the conversations. And I honestly believe that, that’s what it is today, you know, the whole industry is revolves, I think internationally around asset management. And at the end of the day, it comes down to that, that’s how most of us get paid. That’s why the companies do what they do. But it really is more about how I would explain it to a client is that we focus on you and not your money, your money is important, but only to the extent that, you know, we help you build investment strategy that talks back to the kind of life that you would like to live into the future. And presently, so it really is, you know, a lot of people use the word client focused. But it really is on in another way. And it is also it is helping clients make their own decisions. So it’s not about having the solution for the client, it’s about helping the client arrive at solution on their own, because that is really the only way that they’re going to change their behavior. And and then achieve awesome, but I would like

Louis van der Merwe 

to imagine that you have a much higher buy in from your client, you know, if if you guide them through this decision making process that that you talk about?

Dirk Groeneveld 

Yeah, we do. Because I think, you know, the the industry has forever and still does, you know, it chooses to keep the general public confused, because it suits them and people don’t ask too many questions. And I think when you know what part of our job is to simplify the all the financial terms and what it means and and help clients understand that they, you know, their powers is really in the choices that they make, both now into the future. And to understand that they actually have control where I think a lot of in the past, the industry’s said, just leave it to us, and we’ll do it for you. So yes, definitely, it definitely allows clients to feel empowered. and that in turn, I think gives him a lot of freedom.

Louis van der Merwe 

Yeah, great. Are you able to share a little bit of the onboarding process that you would take a new client through? Because oftentimes, it sounds like, well, this lifestyle, financial planning is a lot more work than just, you know, building a investment portfolio for clients.

Dirk Groeneveld 

Yeah, I think it’s it is a lot more work. And it’s completely different. So, you know, just on the investment side, we have, we have partnered with asset management team that do that for us for the last 20 years. And they just got inflation plus targets, which they do achieve over the long run. So that didn’t talks back to the plan. But yeah, so we have a Weibull to three meeting process that we take clients through most of the clients that come to us have been referred by existing clients. And the first meeting is really just a coffee chat where we get to know a little bit about them and why they’re here, why they’re not happy with who they’re currently with, or, or, you know, the problems that their wishes that they’re having. And and really what we what we do provide him with his the opportunity to then enter our process. So, in our first meeting, a lot of it is really just finding out about who they are individually, or as a couple as a family, you know, what’s unique about them, you know, what are their motivators? Just really, so a lot of history, a lot of finding out a lot about the past, you know, we, I believe it’s important to understand how someone has got to where they are to understand who they are. And, and very often we find, we ask them questions, and, and they, it’s things that they haven’t thought of, for many, many years, but it has helped, you know, format, the way that they think about their finances or about life in general. So we do a bit of that. And then we also take them through our process, where we talk about now, the the three hats of lifestyle, financial planning, which we like to use, which Paul Thompson, very candy showed me, yeah, and the different roles that we play in, in life planning, financial planning, and in financial advice. And we, we build the expectation on what’s working with us, we’ll be like, what the what the actual practical part will be how often we would meet, how we would meet what we were discussing those meetings, and most of it is not about funds or money. And we Yeah, that’s generally about an hour. And then, you know, if after that they happy with, with what they’ve heard, and we also comfortable that we would be able to add value to them at this point, we very, mostly, we have no idea of the of the financial status of the of the couple, you know, we purposely don’t ask them to bring any information to that meeting. Because we just find that, you know, if you’re looking at the money, it’s very, it’s as human as we are, it’s difficult to look at the person separately. So if they’re happy with that, then we will send them a welcome letter that evening, and then start dropping off information bits that they need to then collect and get back to us. The second meeting, we have what we call is our goal setting meeting, we do a little bit more exploring into the personal side. In other words, you know, how do they feel about money, what’s important about money for them, about their family, important people in their lives, by how they feel about retirement, how they see retirement. And then obviously, you know, the general very general goal setting which, which I’m starting to realize is more kind of, yeah, is that stuff’s always gonna change, and it’s not really as important now, half an hour, replace my car or go on holiday. They are they are important factors. But it’s not really as important as the the deeper goals or ambitions that that a person or a couple of would have. By this time, normally, we’ve collected most of the information. And then what we do is we say you can hear we kind of following the six step financial planning process as per the financial planning Institute, and then we obviously sit and do a little bit of maths. And then we would sit with them and show them a snapshot of where they are, at that point, we’ll also do a bit of education on on markets. So we just talked about very basic principles about the need to beat inflation, you know, the the need to, to have to be exposed to risk, you know, the how markets work, you know, short term long term, but very, very basic principles that help them understand, you know why keeping their money in cash is probably not a good idea in the long run. And then we then we show them where they are. And then after that we’ve highlighted certain issues, which we believe are important. And this, again, will be fairly general stuff, or we will get clarity on certain things that we had picked up. And, yeah, and then we go into discussion from that, and that, that meeting can last a while. And then obviously, you know, you get clients with different complexities. And based on that, you know, after that meeting, we would then go back and do a bit more work, or they would do a bit more work and get us more information. And then we would do more work. And we would really just carry on with that process until you know, we we’ve achieved everything that they need. So very often is a list of things that need to be done. You know, things like updating walls, checking trusts, businesses, structures, and partnership agreements, all those kinds of things. So very often that that ongoing process can actually take us months, a lot of the time. But you know, the belief is that the more time we spend with our clients, the more we can build a relationship, the more trust we can build, and the more value we can add.

Louis van der Merwe 

Sure, it really sounds like you’ve nailed down that process over the last couple of years. What’s been one of the resources that have helped you think about structuring lifestyle financial planning or was this just something that you’ve managed to create?

Dirk Groeneveld 

I think it’s I think it’s from different sources. You know, when when you know, our pack became excess, and was then bought by Mutual he started on mutual wealth. So they were, there was a process that they had put in place which, which is pretty similar, obviously, what we’ve done is we’ve enhanced it, and we’ve personalized that more, you know, I, I talked to a lot of people around the world, I read a lot. And I get quite quite snippy. And I’ve made, you know, people like, like Paul and Mitch and Brett Davidson, and the other list, the list goes on. Just to find out and learn more from all of these people, people like yourself as well, obviously. And then, and then obviously, a lot of a lot of our, you know, we call them strategic partners, you know, the whole, the whole AIPAC in an access community was, has been fantastic in building, building community, you know, the best place to learn is from other financial planners. And, you know, we built a community that is full of sharing and helping each other and, and all of that. So I think, you know, we all eventually build something which makes sense to us. And you start, you put it together, and it’s a bit rigid, and you work through it, but as you do it more and more you it becomes more your own your own adieu, we constantly upgrade and, and change things. And then we also as we learn, we get more experienced, we able to tweak it for certain clients week, we can send certain clients, you know, maybe need a different approach to others. But we, we we do not work with anyone, if they are not prepared to go through through that process in we’ve simply found out that, if we do try and shortcut it, we get problems later on.

Louis van der Merwe 

I think you’re the name of your practice, client gaze, sums it up so nicely, you know, and it’s come through a couple of times, and you said, Well, we really care about our clients. And it shows up by you taking the time to research things globally, and saying, Okay, how do we deliver the best possible financial planning and lifestyle financial planning experience to our clients? When you constructed your team in terms of the business? How do you select people? And how did that happen?

Dirk Groeneveld 

Yeah, I got lucky, I got unlucky first. You know, over the years, I’ve been in one or two attempted partnerships, and, and they haven’t really worked, looking back really just because of, I suppose different personalities, different outlooks and different. I don’t want to say values, but maybe vision vision. And I’ve just been very careful. And when we choose people to work with us, I look more to the quality of the person and the values that that person has, obviously depends on the work they’re going to be doing in the business. But you know, I’ve found that people with the right attitude, and that caring attitude, you know, they What do they call it the key gene or whatever, you know, those people can learn anything, because, you know, they work in an environment where they feel that they’re part of a team, and they feel that they’re adding value, and then they they’re naturally going to be doing that. So, you know, we have to choose people who have qualifications, you know, to full financial planning roles. So we have done that we are doing that. We also where the businesses paying to educate existing staff you came in, as a receptionist to become a financial planner. So you know, we make sure everyone within the business has their own career path if they want. In fact, we do want them to have a career path to personal growth is important. But yeah, I think in short, just choosing the people with the right values, and similar values. That doesn’t mean the same strains, different strains, but similar values is really important. Because it does come through in in how the clients feel when they when they deal with anybody in the business.

Louis van der Merwe 

Yeah, Seth Godin talks about hire for attitude, and train for skill. If you’ve got someone with the right attitude and the right vision, I guess that would also help you think about succession planning, you know, what are the Who are the people that you’d feel comfortable leaving part of your business to?

Dirk Groeneveld 

Your most? Certainly, I mean, you know, I think it’s something that, you know, when you start off in this industry, as I said, setting policies and to where we where we are now is a completely different situation. And, again, you know, rightly or wrongly, a lot of people traditionally in this business stuff to build a book, and then sell it for a multiple I battle with that concept. I just don’t understand how we can sell a relationship, but it does happen. Yeah, so what we’re doing having having identified a couple of individuals who who have very similar values, want the same sort of thing long term. Have patience. Want to make a difference? They’re, the only way to really do that, to be honest is for, you know, I’ve got to give, and they’ve got to give. So I’ve got to we entering a process now where we will be selling innovative common shares to younger planners in the business to allow them to get skin in the game. You know, they don’t necessarily have the funding, so we assisting with it. But the idea is that in the long run, instead of having 100% of a pie, we’re gonna have a percentage of a much, much bigger pie. You know, the one side is making as much money as we can. And I think most people will have learned that that doesn’t bring happiness, but being part of something that is meaningful, you know, that’s, that’s for me, and I think the people we have in the business that really makes makes life worth living. So so that’s the path that we chosen. And, and that we working towards, we know we don’t have all the answers as to how to work but certainly bringing in caring individuals, and and the goal is to build something which is bigger than ourselves. And that continues, it will never be. No one’s gonna sell the business one day,

Louis van der Merwe 

I can see how important these relationships not only with your clients, but also with your team members are. Are there any client stories that stand out in your mind of looking back over your career so far? Anything that’s, that’s memorable that you feel comfortable sharing with us

Dirk Groeneveld 

live with the two that what would the one is on both ends of the scale, let’s talk about well, so you know, we had this client Ed for years. And he was a, he was a little trade and trade it on his own. And he would sell to supermarkets and, you know, put his children through varsity and everything. And he just worked and worked and worked. And he was getting to an age where his health was really tough tech starting to take strain. And as much as I would advise them to kind of cut the purse strings to some of the children, they just couldn’t do it. And end eventually, one day, they walked in, and he looked an absolute mess. And I said to him, you got to stop this now. And his wife was with him. And I said, you have to stop this now you have to make changes. Otherwise, in a year’s time, you’re going to be dead, and your wife is going to be on our end. And she looked at him and he looked at her and that was she just nodded and said, that’s exactly what’s gonna happen. And he said, Yeah, okay, that’s fine. But how do I do it. So eventually, what we had to do is, we had a son who was living with him, and not contributing it, although he had a decent, decent job. So eventually, we had to sell the house, move them into retirement village. So that’s the son had to find his own way. And then restructure close down his business, and restructure everything so that they were then able to retire and to actually live. And, and it’s been, it’s been tough for them. And they’ve been things that they haven’t been able to do. But it was actually wonderful. He sent me a message last week or the week before just he was obviously in a reflective mood, they were spending time with a granddaughter. And you just sent us a message thanking us for the role that we played in his life and and what it means and he just got a very different way of expressing himself. When I look at that, I mean, that’s all he talks about. So so you know, making a difference like that, which was potentially very risky. But I think in the end, you kind of you got to go with your gut and your heart. And you’ve you’ve got to give someone the courage to make that change. So that’s, that’s a very special story to us. And then we have added other content, the other end of the scale, who came referred to us by the children in the early 70s, more than enough well off, but who grew up in the war. And as many of us would know who our parents who grew up in the war you know, were extremely conservative lived very very frugally had more money than they could ever spend but struggle to spend it you know literally when God never cappuccino because they felt it was overpriced. And and unfortunately, the planet that they’ve been with, since their retirement was very much in the old dinosaur kind of framework where you would send them a report once a week and see a once a year and see them once a year and just basically say, well, it’s up or it’s down or whatever. And, you know, we took them through a process, which was difficult because you know, when you take someone in their 70s and you ask him questions like you know, you know how was money growing up and you know, these kinds of things that But anyway, they participated fantastically and it went really well. And he was an engineer, which makes it even more difficult because there is obviously quite analytical I think three years we I’ve been working with them now, after 18 months, they took the whole family, five kids on holiday to the UK, flew grandson in from the US from the US spent two or three weeks together, did overseas trips, and so COVID hit, they’ve just been recently, they are helping one child in the UK with a serious acquisition, because of a health issue. They’re doing things that they would never, ever have done before. Never ever done before. And you know, ultimately, they would have eventually passed away and their children would have entered, now some of them would have had quite a lot of hardship, and they wouldn’t have been able to have those times together. So, you know, and what, you know, when I when I when they decided to work with me, you know, when I actually showed them the modeling, and I showed them that actually, if they moved all the money into cash, they would never run out of money. She She got very emotional and shed a tear. And I’m not sure if it was anger, out of anger or out of relief. And I said to her, so you know, why? What is the reason? She said, Well, the last time they were with the advisor, as they were leaving, she turned to him and said, Are we going to be okay? And he looked at and he said you should be. And she said she didn’t sleep for a week. So having certainty to know that not only was she going to be okay, but you could start changing our outlook on life and start spinning, you know, more quality time with a family and loved ones. Again, there we’ve I can see that we’ve really affected the change in the labs. And yeah, that’s what we’re here to do.

Louis van der Merwe 

Wow, thank you for sharing those stories with us take it, you know, you’re actually bringing meaning to your clients lives through helping them actually be able to enjoy their money and enjoy it with with the people that are important to them. So I almost feel like in our lifestyle financial planning, doesn’t, it doesn’t sound like it would even encapsulate that. But it’s just a byproduct of what you do.

Dirk Groeneveld 

Yeah, I think the job is to spend as much money as you can, you know, and the problem that a lot of people who’ve built up wealth over a long period is that very often, it’s because they’ve saved really hard and conscientiously and and they feel guilty when it comes to spending money and having a good time. And, you know, quite differently to let’s say, You’re all the top advisors, we don’t look to accumulate fancy, obviously, we do as we as we gain clients, and the management or whatever you want to call it, but what we look at we look at is how can we get clients to spend their money? And that’s a lot of fun. That is a lot of fun. But it’s very rewarding as well,

Louis van der Merwe 

it can we maybe delve into that a little bit, because, you know, imagine there’s a client coming to you that’s getting to retirement, that’s built up a wealth of money over the last 65 years? How do you get them to change from accumulating to being able to spend that money guilt free? What are the things that you would do in your business?

Dirk Groeneveld 

Look, Louis, there’s some that we just we don’t manage to do it, you know, but that’s fun. Yeah, I think giving them you know, obviously, with all the planning that we do, we always do on a conservative side, you know, as much as we planned life happens. And, you know, and as we get older, you know, those can be negative things as well. So you know, which, which could oversee meeting current costs. So we, we try and plan for all of those and make allowances for all of those in our planning. But I think, again, spending more time with clients, you know, if they hear the same thing over and over again, then eventually they will eventually start to believe it. And and, you know, in our in our goal setting and exploratory meetings, you know, finding out what it what it is that they want to do, what did they want to do when they were 18 years old? You know, what, you know, when they were 25, when they first got married? You know, what were those things that they wanted, and then they’ll come up with think, oh, we forgot about this completely? You know, and very often, and very often what happens is things that they really, really want to do, once they start doing they find out actually it’s not what they want to do is something completely different. So this goal setting thing, as I said, goal setting, I think you got to find another word for that. It’s it’s maybe life. I don’t know, life experiences, I don’t know. But I think it’s it’s an ongoing thing. You know, when when we do a review, you can’t just sit and do a review and say, Well, you know, what happened over the last year? What are your plans and out of the money do? I think it’s you know, you got to revisit every year and say what’s changed, you know what has changed, but obviously in your life, but then also about the way you feel about certain things, you know, and when people retire the best years they have or those immediate years when I stopped work. When we talking about health, we’re talking about their ability to travel and be active and do things so you know, it’s very, all very well planning for someone to the age of 105. You know, and obviously it’s important to do that, but not at the cost of not living In the presence, so obviously finding that balance is important.

Louis van der Merwe 

Yeah, I think so many times, financial plans tend to be super conservative. And then the only thing that ends up is, you know, their legacy or the inheritance just is that much more, but someone missed out on the what they termed the gogo years, right? So you have the energy you are able to spend, and it almost ties into, you know, the George ginder life planning questions, where they start off saying, Well, if money wasn’t the wasn’t a constraint, what would you do with your time? How would you spend money? And then from the limited to say, Well, if you only had 10 years left to live, what would you do with your time? And then the third one really gets to the crux, where they’re limited to say, well, you go to the doctor, and you find out, you only have 24 hours to live? Not what do you do, but what did you miss out on? Did you not get to be? What did you not get to experience and I can only imagine that these kind of things come up, as you spend time with your clients discussing what’s important to them. Now they

Dirk Groeneveld 

do and and again, certain clients get to that point a lot easier than others. And obviously, depending on the relationship we have with them, we can build a quicker work report with certain people. But again, that’s why we, you know, we would rather choose to meet more often with our clients, you know, so we have, we have a fixed six monthly, you know, the one meetings that catch up, and the other ones have full review of their financial plan and financial lifestyle plan and situation. But we also encourage, contact, you know, in between if anything happens, yeah. And we also found that the more that people are actually doing these, reaching these dreams in a lifestyle and their goals, as they start living more of that life, they start looking for more, you know, you know, I think, you know, moving from a working life to retired life, we know can be very stressful for clients. We also spend a lot of time before they retire educating them on what does it actually look like? You know, what is it? You know, trying to get visualize what a day is gonna look like in retirement,

Louis van der Merwe 

you have these upcoming transitions. Now, what can you What can you prepare for? Now, certainly, the one thing that comes to mind is obviously, advisor remuneration, because a lot of the things that you mentioned is, you know, we’re not gathering assets, we can only work with so many people, the money is less important. How do you balance remuneration? What is the structure look like? And it’s something that you’ve thought about quite a lot. And yeah, just love to hear your thoughts around advisory generation.

Dirk Groeneveld 

Yeah. So I mean, obviously, initially moving from commission to fees was, was really hard. It was very, very tough. And as I said, you know, huge, hugely added downscale lifestyle. I got divorced around that time, as well. So it was, it wasn’t an easy time. But at the same time, it wasn’t a difficult time, because I had, I knew that what we were onto was something far more valuable in the long run. So there was that change. So that the assets under management, the model was a far fairer way of working. But as I’m getting into it more and more, and I’m also realizing it’s not the ideal way to work, because it doesn’t really speak. You know, if you look at the the three hats scenario that Paul Thompson created, with life planner, financial planner, and financial advisor, we’re getting played on the financial advisor side. Whereas really, really at the least value. And

Louis van der Merwe 

sorry, did you just mind defining those, those three, like, what are the differences between them?

Dirk Groeneveld 

Yeah, so the the first test, and the most important is helping clients with their life planning. And that doesn’t mean that we either life planner, it simply means helping clients uncover what is important for them in their life and what they want to do. So it’s like I said, you know, the goals of buying acquire every five years and going on holiday, once a year, those are very, very simplified things, but life planning. We don’t do life planning, but helping them with their life planning is helping them uncover the values, what is important to them, and if they travel, why they would want to travel and where they would rent and why they and what do they want to do with their kids or their grandkids? And why is that important? You know, so it really is that and then the financial planning here deals more with the, the mathematics of the situation, you know, you’ve got X, Y, Z spending, you’ve got extra spending, why is the money be invested to make sure that you know, it doesn’t run out before you run out? So so it’s really the cash flow planning and all of that, and then the financial advice is, is simply what vehicles do we use? So do we use, you know, retirement funds or shares or unit trusts? And then what funds do we use those kinds of things?

Louis van der Merwe 

Okay, so the product implementation, but Okay, thank you for clarifying that.

Dirk Groeneveld 

Yeah. And the and the The irony is that we get paid on the bench on the financial advisor side. Whereas we add far more value on the other two. So we use a assets under management fee scale at the moment, and we scale it down because I do believe the, you know, the, the notion that if you charging 1% on 10 million Rand and you, obviously owning what you do on it, and you would charge 1% on 50 million Rand, that you added more value. I mean, I think most people will understand that, that just doesn’t add up. So it’s, I’m not saying it’s wrong, I’m saying, for my mind that needs to be looked at. Obviously, the industry works as always worked with the clients who don’t pay you enough, and they can’t see pay too much, is that cross subsidization? I believe the universe works like that, to a certain extent. So it’s not the end of the world. But I do think there’s a limit probably to the amount of value that we can add. And the biggest thing is, I think they are too many advisors. in overtime, the majority of our big advisors, and you know, the successful ones are the ones who’ve sold the most, who have added nowhere near value to the amount that they’ve earned, and can still continue to earn. So I think there’s a huge disparity there. We’ve got people paying fees, and they see an advisor once a year, you know, the portfolios have never been reviewed, we’ve got a new client referred to us by Actually, these other clients, she’s never been asked to do a budget. Now, I’m not sure how you could drop a financial plan, if there isn’t a budget. In this case, there is no financial plan, there’s money. So, you know, this person’s been getting absolutely no value, but they’ve been paying a handsome price for this. And they’ve, they’ve never questioned it, because the industry kind of portrays this as a norm. So personally, we looking and I’ve chatted to Alan Smith, in London, from capital a lot on this, and I was doing a talk on the 20th of May, which we’re definitely going to be watching about value spaced pricing. I’m not sure how it works, it’s always talking to him. But I just think, and again, I’m not saying that it’s wrong, I’m just saying I believe there’s a better way and a fair way of doing it. And I think the there are a lot of medium to wealthy clients who are paying way more than they need to be paying, you know, a lot of situations are very, very simple. If you’ve got a single person with one retirement fund, versus a couple with a couple of trusts and kids and grandkids and different business structures, you know, something like that obviously takes a lot more work a lot more skill, and should be priced differently to to the simple scenario. And in there, I think the last massive opportunity, you know, one of the biggest barriers to entry in the industry, I think around the world for youngsters is that the typically the people they’re going to deal with don’t have money, because they’re serving they millennials as well. Or Gen wires, I think is a new one now I’m not sure. And you know, so it’s very difficult for them. So I think these kind of fee models will help sort that industry out. And I know people talk about the advice gap a lot, because they’re worried about all the people who can’t afford to pay for advice. I see it differently, I think of all the people who are paying 10 times more than they should for getting absolutely zero advice. So I think there’s enough to go around for everyone. And I do believe that in the next five years, even in South Africa, that is going to be a large, large change on that side of the industry.

Louis van der Merwe 

Yeah, that makes so much sense. You know, being able to work with people that might be rich in terms of income, but haven’t accumulated assets. By changing your your mechanism of pricing, you now conserve those clients. So it doesn’t necessarily have to be limited to clients that have accumulated, specifically investable assets. Right? What about the clients that have large property portfolios? I guess it’s just rethinking the way we’ve always done things in there. There’s a bit of a theme, you know, I can see throughout your history saying, hey, this, this model is broken, we need to rethink that. What else is there that kind of you think is broken in the financial services world that that we should be paying closer attention to?

Dirk Groeneveld 

I think the industry still driven very much by your big, big companies, you’ll have companies, your asset management companies, and unfortunately, I think the problem you know, we obviously deal with a few of those and I can tell you that the quality of person at a high level is is way way superior to what it was 10 years ago and I’m not I’m not saying across the board, I’m just saying Generally, the how approachable they are, how open they are to a new way of thinking and trying to Actually maneuver those 150 plus year businesses on our into it a different, different see. And unfortunately, I don’t think the change is going to come from them. Because, you know, they, they they bosses they got so shareholders and you know, perhaps CEOs who get appointed on a short term contract and arena read according to that which flies in the face of what the people aren’t they actually need and, you know, I’ve got made to run Asset Management businesses and I joke with him, I say we do all the work and you make all the money. And I think that needs to change, you know, again, the fact that you’ve got a fund that might hold a billion Rand and you know, they’re charging one and a half percent asset management fee, and then it’s one day, it’s got 2 billion and I still charging the same, again, just does not make sense in in, in any other industry. You know, when you’re buying in bulk, you get a discount. And again, if you see how many of those companies are actually outperforming indices, I think I think South Africa markets in for a big, big, a big wake up here. And I think there’s a there’s an opportunity for the first big player to live with a few unhappy shareholders for a while, but build a long term business model that’s sustainable. Because I think eventually, when it does give, and it will, it’s not that it won’t, it will, because it’s happened. It’s happened in the States, it’s happened all over the world in the UK, you know, they call it, you know, we call it peces or evidence based investing. The fact is, is that the proof is in the evidence. And you know, to be to be paying huge fees for very little value to somebody doesn’t make sense. And and in a world where the more we can cut our expenses, you know, the better long term outcomes, we’re going to get that that’s certainly going to happen and the public RT are getting smarter and sharper. You know, when you’ve got businessmen who’ve who’ve been successful, because they’ve paid attention to the bottom line, and to expenses. And we are they’re getting very aware they’re not getting value. It’s only a matter of time before they start following blindly. And you know, the paper, and they start asking a few questions, and I’m seeing it more and more. And, yeah, I think I think there’s a huge opportunity for one of the big players, because they have the science to be able to do this. But I’m not really seeing any willingness at the moment.

Louis van der Merwe 

So am I correct? That you’re actually kind of embracing that cost discussion with your client and saying, Yeah, let’s figure out a way to bring down the total cost, as opposed to, you know, seeing cost reduction as a threat to the advisor.

Dirk Groeneveld 

So So for instance, with the asset managers we’ve worked with, it’s always it’s based on the final outcome. So it’s based on the outcome after costs. So in our cash flow modeling, we build in whatever fees, they are the asset management fee, our fee admin fees, all of that it’s built in. So for me, you know, it’s not that no one’s allowed to make any money, of course, you know, everyone needs to feed their families. And if you work really hard and do very well, that’s fine. But we need a cost is cost is only an issue in the in the lack of, you know, where there’s no value. And, and what I’m saying is that clients would be able to achieve certain outcomes a lot easier. If certain expenses, were maybe more in line with the value that they brought. Yeah, so I think there’s, there’s a huge margin is a huge, huge margin there. And it’s going to happen. So, you know, we don’t, our clients are aware of our costs, and whatever costs they’re incurring, you know, in one of the first meet in the first meeting, we we run through the asset management fee, the the admin fee and our fee. On every on every review, we run through that as well. We’ve, in fact, recently, a few clients, we’ve sent them documents to reduce their fees, because we have a sliding scale. So because markets have done nicely over the last short, well, you know, we probably look at it every two years or so. So we’re actually getting a reduction in costs, which is, which is quite nice and fast, they’re still hugely profitable clients. So I know this is very contentious. And I know, especially in South Africa, people saying, it won’t happen, it won’t happen. It’s going to happen, it is going to happen. And they are many, many dinosaurs out there who have who have done incredibly well personally financially. And I’m not saying it’s wrong. I’m just saying that, you know, times are changing and that that spread could be spread through over a lot more people and a lot of clients can achieve their outcomes a lot easier, without having to pay all these costs over over the lifetime.

Louis van der Merwe 

I guess it’s one of the few things that you can control. And we’ve seen that you know, just looking at the probability of success, how that increases if someone’s fees drop. I want to talk a little bit about the people that you mentoring. I know there’s a group of youngsters or young advisors even to be saw Good to see you, sir. Graduate understood that correctly? How do you see this? How do you see their role in the industry? It also what are you sharing with them to keep them motivated because it can be super lonely. And it’s really a tough industry to start out with

Dirk Groeneveld 

your salary. For me the biggest, you know, when I first started to work with AIPAC in in excess, you know, and I started with very, very slowly it was, it was a, personally a very tough time for me. And I really wasn’t able to focus too much on the business because my family took priority. And what I’ll never forget is the people in that business are picking access. And then the other strategic partners. The way I was treated was, was as the absolute equal. Yeah, it’s quite emotional for me, because, you know, they helped me along and kept me going and made me feel that I was relevant, which was a tough time. So you’re now the she’s kind of on the other foot, and we have both a half decent business. And I think it just started off I met, I met one of my daughters met at a Bri. And he was a young 10, I just moved to PE. And he had kind of heard about this concept, but didn’t really know. But he’s a really good chap. And then a couple of other youngsters that I chatted to on LinkedIn and asked for advice now and then. So what I did is I just started, and I had Alex, it started with me. So I just started a young group where the guards would come in once every five or six weeks. And we would, you know, because people don’t know what they don’t know. So we talk about lifestyle planning, and people think, Oh, well, it’s a model, it’s not a model. So, you know, we would, you know, I would I would share stuff that I’ve learned over time, and like Paul’s three heads, so stuff, you know, from from Mitch, Anthony as well and other people. And so it was just a safe place for them to ask questions to learn, I took them all through my process. So the process that I’d taken years building, I basically gave them all of the slides, everything I said, well, you’re gonna have to change it, because it’s got clunky logo on it. But you know, and and bold, bold, your own process, you know, something that works for you. But you know, this is a, this is a good way to start. So we started doing that. And then obviously, the group grew slowly, as you know, they taught some mates about it. And then, and then COVID hits. And then we moved online. And then we started getting, you know, people all around the country. So it’s not a huge group, I think they’re about 17 or 18 of us. In the group currently, yeah, and we take an hour and a half, once a month. At the moment, we’ve just got everyone sharing the onboarding process, you know, how they, how they take clients through, and it’s really interesting. And as I said, it’s just a safe place for people to ask questions, to, to not feel intimidated, that you know, that they might sound silly, and to discuss certain things. So we try and stay away from macduffie discussion, because that will go on forever. We don’t talk about asset management, because that’s not lifestyle planning. It’s a part of it, but it’s, it’s not the most important part. Yeah, and, and, and it’s just to, you know, there were people that helped me, so I think I think giving back is, is really, really important in our personal, I personally have a personal mission, or a just cause as Simon Sinek would call it, you know, to have a living last and financial pain in every home in South Africa. And, and the there’s only this three ways is we can’t we can’t do that on our own. So you know, this is also part of the decision to to grow the business in with personnel is to try and spread the message more, but we can do that three ways. Firstly, by helping youngsters in the business, to become better planners, better lifestyle planners, you know, by by educating the public, which is something that we, we need to be doing more because most people aren’t, they don’t understand that this isn’t that this is a different thing. They think they’ve got it, because their brokers tell them that they’re doing it. And then also, you know, through our own clients, you know, obviously by by getting our constant place to stay, they are able then to spread the word until you know their friends and family about it. So for me, yeah, that’s quite a personal mission. And this is this is one way of doing it by just kind of spreading the love and you know, getting more people who become disciples of lifestyle financial planning after

Louis van der Merwe 

that is a really admirable mission. Can you repeat that again, for us a living lifestyle, financial plan in every household in South Africa?

Dirk Groeneveld 

Yeah. Well, you know, if, if everyone, regardless of the financial station, went through a process, because part of this is education as well, obviously, I just understood that everything they do is a financial decision. It has an effect now and especially into the future. So you know, that they just people don’t know People don’t drive themselves to a negative financial position on purpose. They do it because, you know, they’ve got no one telling them that it might be the wrong thing to do. So you know, we to help, we need to help people with their conscience. And we can do that through education. And through coaching, and assisting and just being, you know, they call it a trusted advisor just being a part of their life, you know, that they can pick up the pick up the phone and call us quickly and ask us what about this? Or what about that, and we get, you know, we get people don’t buy vehicles without getting old and say, Well, you know, it’s time should we do it? Or Shouldn’t we do it? And then we have the discussion about what’s going on in your life? And do you need it? And how do you feel about it and all of that, so. But yeah, I mean, if you know, the biggest problem in this country is the huge inequality that is, and the only way that we can do that, you know, we dealing with, with the vast majority in this country who have not had exposure to financial planning. And if they have, it’s been the wrong kind of financial planning, it’s been policy salesmen who have ripped them off, because as people need to survive themselves, and they’ve got targets and branch managers, and regional managers, and all that sort of thing. So you know, it hasn’t done hasn’t done anyone any good. So, you know, if we slowly able to, to eke away and to educate more people, and, and that’s why I’m saying, you know, the, if you look at the amount of fee that gets earned in the industry, and it’s being enjoyed by so few, you know, never have so few and so much and edit so little value, if we could just change that to, you know, and again, it’s nothing wrong with being financially successful. But I just think there’s a huge disparity between, between that, and that needs to change. And if we do that, you know, if we get the average South Africans wealth to, to increase, you know, tenfold over over a few generations, it will change the, you know, the outlook for the country completely.

Louis van der Merwe 

If that’s not the positive evolution of financial advice, I don’t know what it is. And thanks for for the massive role that you play in, you know, moving this industry into your profession, so that we can actually get to make a bigger impact in our clients lives. That part that you mentioned, you know, your clients find you when they have to make a decision on which car to buy. It makes me think that we can think about client requests one or two ways, it can either be Oh, this client is asking for something again, and it can be a burden, or it could be what we’re trying to do is working, our clients are reaching out to us, because we help them to make better decisions, they feel more confident, after they’ve had that discussion, and they have more clarity, and more purpose, you know, what more can any profession give? I can’t imagine of anything else.

Dirk Groeneveld 

Yeah. Because you know, the answer isn’t always Yes, you can afford it. You know, it’s Well, yes, you can afford it. But what else could you do with that money? And what would that mean to you? And how would that change in other aspects in your life? I think our our job is, you know, we came in as, as experts, you know, setting financial concepts and policies and investments. And, you know, then, you know, we all, we got our CFP and we became qualified, and we knew a bit more and, you know, that we can really good at problem solving. But I think, where the future lies, is helping clients solve their own problems, you know, we simply, we help give them the tools to come up with the answers themselves. Because we all know that if you come up with the answer yourself, it becomes ingrained in you and you and you will truly follow through and you will do that, as opposed to so you know, someone standing behind you with a weapon saying, Come on, dude, come on, let’s do it, you know. So, I think that’s really where the future lies is, is with empowering people. And you know, if people are thinking that way, then there’s a good chance that they’re going to educate their kids to a similar mindset. And again, that’s then contributes to the betterment of society.

Louis van der Merwe 

Brilliant. Derek, I think that’s a that’s a perfect place for us to end today’s conversation. Thank you for being so open and honest and sharing your journey and your clients stories and how you see the future. And I wish you all the best with your practice and making a positive difference in South Africa.

Dirk Groeneveld 

Thanks for joining the course. I know you do. Thank you. All right. Just

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