Surveys show bleak picture

It should come as no surprise that executives of South African companies are less optimistic today, compared to a year ago.

A recent survey by Mercantec reveals the CEOs in the financial services sector, in particular, are not overly optimistic over economic prospects for their industry.

The general level of confidence declined to 38.1 points, its lowest levels since 2009, when these indexes were first measured. In addition, 64% of those who took part in the survey believe that we are headed for a junk status ranking, according to an article in Network24.

This view is based on a lack of confidence in leadership, the current fiscal policy, over- regulation and low growth prospects.

The financial sector which, in 2015, was the most positive, showed a 50% decline in confidence and could be an indicator of a potential crisis in this sector, according to the Mercantec survey.

PPS Professional Confidence Index February 2016

More than half of the professionals surveyed in the latest PPS Professional Confidence Index (PCI) would consider including global assets as part of their diversified portfolios. The survey, which received nearly 4 000 responses, revealed various insights into graduate professionals’ outlook for the future of the country’s economy.

“This tendency towards a global allocation is likely to be a direct reflection on their current perceptions of the economic prospects of South Africa in the near future. When asked how confident they are in the economic outlook for South Africa over the next twelve months, the respondents revealed a confidence level of 42%, states Duane Littler, Business Development Executive at PPS Investments.

A steep decline in the rand, and drought-induced food and electricity price increases will put significant pressure on inflation, and in turn pressure on the country’s economic growth, says Littler.

Some 73% of the respondents reported feeling despondent about their long-term savings in the market environment, and 40% of the respondents are not entirely confident that they are investing enough for retirement, says Littler. “People are living longer and the cost of living keeps on rising – even the wealthiest of investors may underestimate the impact of inflation on purchasing power over time. Investing enough, and in the appropriate vehicle is critical. A credible financial adviser should be able to assist with this.”

On a related note, 48% of respondents are considering investing in a tax free investment account (TFSA) and 24% indicated that they are already investing in a TFSA. “However, it should be used as a long-term investment vehicle and to supplement, and not replace existing retirement savings vehicles.”

Both these surveys were conducted before the Budget Speech, which usually has a big impact on how consumers and businesses view the future of the country’s economy.

Retail Distribution Review

One of the expected outcomes of RDR is an increased focus on the upper market in view of its ability and willingness to pay fees when it replaces commission. This sector has long been an elite target, with most product providers having established units to focus on high nett worth clients.

The Advisers Voice and Views

Last year, we assisted Insight-Discovery, an internationally acclaimed consultancy firm, to provide a voice for South African financial advisers to make themselves heard.

Nigel Sillitoe, CEO of Insight Discovery, noted at the publication of the results:

“The lengthy and detailed responses to our open-ended questions prove that South African IFAs are incredibly passionate about their industry. For example, over two-thirds of all respondents took the time and trouble to give us feedback to open-ended questions such as: ‘What is your summary opinion of the RDR document released by the FSB?’

A further incentive to take part is that the FSB will be provided with the results for consideration in their future planning.

Invitations will be sent to qualifying advisers during the course of this week.

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