How the investment landscape has changed in 20 years

Looking into the future, 20 years seems like a very long time. Looking back, 20 years flashed by in a blink.

But when you sit down and break those two decades into smaller, manageable pieces, one realizes just how much has happened.

With the 20^th anniversary of Brenthurst Wealth as a company coming up next month, I sat down recently in quiet reflection on what has happened – investment-wise and otherwise – over that time.

Quite a lot has happened, some of it I wish we never have to endure again.

Here are some thoughts for consideration.

Brenthurst started as a 3-person /zero-client company with one small office in Fourways in Johannesburg. Like most small businesses started and probably still do, we simply started. One day at a time and one client at a time.

The ‘WE” were me,  fellow advisor Brian Butchart, and my wife Sue who came from a marketing background.

I am fortunate to say that my first client is still with the company two decades later, and so are the founding directors. This is remarkable in its own right as the investment industry is known for its high degree of mobility. People move around at the drop of a hat to competitors.

Why Brenthurst?

The first issue was the name “Brenthurst”. Many people still ask about the name which has a very long and powerful connection with the Oppenheimer dynasty. The residence of the late Harry Oppenheimer was (and still is) called Little Brenthurst. The Brenthurst Foundation is still sponsored by the Oppenheimer family, as is Brenthurst Clinic and the Brenthurst Library.

All in all, a powerful connotation to the richest family in South Africa.

So, what better way to get immediate branding than by naming yourself Brenthurst Wealth as a young upstart advice company.?

Something told me to check whether the trademark was registered and lo and behold it was not, which I immediately did.

It didn’t take long for a lawyer’s letter (cease and desist) to arrive from the family instructing me to stop using the name. I politely sent them the registration documents and didn’t hear a word from them again.

The year 2004 was also the start of a massive bull market in SA shares. The rand was very strong, and shares listed on the JSE – and in particular commodity and construction shares – were booming as a result of massive growth in China, which couldn’t get enough of the stuff SA mines were digging out of the ground.

The period from roughly 2004-2008 is now recognized as one of the most significant periods of economic growth SA has ever experienced. The JSE, the rand, and the property market were all booming at the same time.

To help lift the economic mood even more, the country was feverishly getting ready for the 2010 Soccer World Cup!

Could there be a better place in the world to invest? And the answer was NO.

It was a good time to launch an investment advisory business. Growth in the early years was almost parabolic with the JSE growing at between 30 and 40% for almost 5 years in a row. There was almost no demand for offshore investment, even though a small allocation was legally possible. Why bother with the complexity of offshore investments when the world was investing in our local market?

Two things happened to spoil the party. The first was the election of Jacob Zuma as head of the ANC and also president of SA in 2007 and a year later the Great Financial Crash (GFC) in August 2008, which brought global financial markets almost to the brink of collapse.

It was like something stopped the music at a tremendously rousing party…. and it has never been the same since.

It wasn’t long before the effects of the nine disastrous Zuma years in office became evident in almost all spheres of South Africa. Crime, corruption, state capture and the mismanagement of the finances of the country soon started to become apparent.

And slowly it started showing up in economic numbers. Capital started flowing out of the country, the rand started weakening while the foreign credit ratings agencies—mostly better informed than the average South African investor—started downgrading SA’s credit rating, and they haven’t stopped since then.

From being investment grade rating in 2012 SA has since then plunged to 3 levels below junk status in the eyes of the investment world. From boom-country to financial polecat of the world.

Over the last 10 years, for instance, more than a trillion has left the JSE stock and bond market to countries that are better managed and offer better investor protection.

Fortuitously Treasury in 2015 substantially increased the amount of money SA investors could remit offshore, R1m per year in the form of the single Discretionary allowance (SDA) and R10m per year in the form of the Authorized International transfer (AIT).

Many market commentators at the time were surprised at the largesse of Treasury as this basically scrapped foreign exchange controls over the money of most but the extremely wealthy investors.

And boy, did the money flow out! As a firm, we saw this as a massive opportunity to form relationships with some of the biggest fund managers in the world—Franklin Templeton, Fidelity, Vanguard etc. We also set up our two offshore funds—the Brenthurst Global Balanced and Global Equity fund—long before it became commonplace for other firms to do the same.

We are indeed flattered today to see so many asset managers now openly advising their clients to move money offshore. To this, I say it might be a little late.

A brave new world

The changed landscape has forced advisory firms to change as well. Today our advisors, 23 of them, mostly all Certified Financial Planner® professionals, have been forced to upskill themselves to advise on global wealth, global tax, and global investment structures. During this time Brenthurst Wealth was for seven consecutive years one of the top-rated wealth management firms in SA, as adjudicated by Intellidex (now Krutham), and voted the most trusted financial advisory firm by Daily Investor.

So yes, we are quite chuffed with ourselves achieving this recognition in a very competitive industry!

The other significant change has been the massive flow of people from the northern provinces of SA to other parts of the country, especially to the Western Cape.

This trend became noticeable soon after the Democratic Alliance took over the control and management of the WC in 2009, resulting in hundreds of thousands of well-to-do families uprooting and moving to the Cape.

Follow the people and you follow the money, is a well-established business rule, and it was no different for Brenthurst Wealth. With our clients increasingly moving down South have we been forced (not really) to move as well, opening six offices in the Westen Cape, double the three we have in Pretoria and Sandton.

The final trend was the move of a group of wealthy South Africans to the Indian Ocean Island of Mauritius, again forcing us to follow the people and the money. Today our office in Mauritius has been open for more than six years offering all kinds of services including wealth management, retirement planning, trust, and company formations to the ever-growing SA presence on the island.

So yes, 20 years is both fast and slow.

Here’s to the next 20 years.