Cape Town Editorial Photography Cape Town Editorial Photography
This article was first published in the fourth-quarter 2013 edition of Personal Finance magazine.
When Barry O’Mahony sets his sights on something, it is just a matter of time before he – to use a rugby analogy – grabs the ball, cuts a swathe through the opposition and touches down under the posts. He had the audacity to put in a bid for Financial Planner of the Year in 2008, when his company was just four years old … “I was one of seven finalists, and I think I came seventh,” he laughs.
But it was a useful trial run, and if rugby has taught him anything (and he says it has taught him everything), it is that there is no shame in the bold move that fails. You do it more effectively next time.
In fact, it was a rugby-inspired bold move that brought O’Mahony to South Africa 20 years ago, when he was 23. He played for Ireland A and Munster, before studying at Oxford University for a year and being included in an Oxbridge rugby tour to South Africa in 1993. The team’s coach was Alan Solomons, now director of rugby at Eastern Province Kings, but, honestly, he probably didn’t have to do much to persuade O’Mahony to bring an extra bag and stay on. Ireland’s Celtic Tiger economy was still firmly caged (“to get a job stacking shelves in a supermarket, you needed to pull a string”, O’Mahony says) and South Africa was on the brink of making history with its first democratic election.
After six months as a doorman at La Med in Camps Bay – no doubt making up in height what he lacked in bouncer brawn – O’Mahony took his first step on the financial services ladder by joining Appleton Capital Management as a share portfolio manager. He had an Honours degree in economics and diplomas in business administration and social studies, but nothing that prepared him for learning investment management from the ground up in an environment where names such as Raymond Ackerman and Pick n Pay meant nothing to him.
“I was crashing and burning terribly in portfolio management, so eventually they moved me into asset management, where a guy named Shawn Stockigt sat beside me and helped me out.
“I got a great grounding in the companies, the South African economy and how it all works. And it became apparent that my strength was in dealing with people; I really enjoyed the financial service part of the job,” O’Mahony says.
After a period as marketing director of Brait’s unit trust business, O’Mahony joined ipac (now Acsis) as head of practice development – the first position of its kind in South Africa.
“It was a fascinating role – I helped financial planners to set up the first fee-based practices in South Africa. Once they were up and running, we would help them run their businesses. After a few years of helping them – and seeing them win Financial Planner of the Year – I thought it was time to take a risk myself.
“I had already taken a risk coming to live in South Africa, and I’d seen my dad set up his own business – a short-term insurance business that my twin brothers now run. In Ireland, you always bought your own house and then, if you could set up your own business, you did.”
So, having earned accreditation as a Certified Financial Planner (CFP), O’Mahony started Veritas Wealth Management in 2004 with a friend, Pierre du Preez, an office in Constantia that boasted a great view, a very old computer and no clients. His wife, Lisa, was eight months pregnant with their son, Connor, now aged eight.
“But I knew the business model and was confident that I knew how to do financial planning properly. I had been lucky enough to see hundreds of different businesses with hundreds of different dynamics, so I knew the kind of culture I wanted to build. We started as a fee-based business immediately, so what the government is asking for now as a business model we were doing nine years ago.
“It’s very tough. You have to go through the hockey-stick graph of starting low and getting even lower before things improve. For a while, you have to take R2 000 or R3 000 home as your monthly salary. You need to prepare yourself for this, and a lot of people aren’t brave enough to do that.”
Nine years later, Veritas is a “sizeable company”, O’Mahony says, with more than a billion rand under management, three frontline CFP professionals, including himself, a support staff of six, and offices in Newlands and Paarl. He defines the ideal clients as people who are passionate about what they do and striving to be the best.
“They are serious about financial planning, but they don’t have the time, the inclination, or the knowledge to get it done,” he says.
Is high net worth a prerequisite, then, for accessing that boardroom I was sitting in?
“Not at all,” he says briskly. “Two things: I think it’s very healthy to have a variety of clients – not to get yourself into this high-net-worth bubble and think it’s normal. Second, we do have a social obligation; that is the issue we’ve got as an industry. We do not go out of our way specifically to try to get low-net-worth individuals as clients, but we do help friends, relations and the staff of clients.
“As professionals, we believe that we must also increase the standard of financial education in the wider community. We make ourselves available to groups at work and at schools and have developed some very powerful talks.”
Social obligation is an issue O’Mahony has been aware of since his early days in South Africa.
After observing the profound divisions between the suburbs and the squatter camps of Cape Town for a few years, O’Mahony assembled three friends around the table at his digs and set about working out how to make a difference. The result was JDI (“Just do it”, originally, but abbreviated to “JDI” because they found they were in competition with Nike for the slogan), a network of working groups – about 26 currently – giving help and support to projects of their choice in impoverished communities. It’s a simple but effective formula that gives each group control over its own activities under the supervision and financial control of the JDI Foundation Trust, set up in 1997 (www.jdi.org.za).
O’Mahony is still a trustee of the foundation,
but has since embarked on two even more ambitious projects: setting up a township rugby league and, more recently, a rugby-linked life-skills programme at schools.
The Vuka Wednesday Rugby League is run in partnership with SA Rugby and the SA Rugby Legends to try to reverse the trend towards gangsterism and drug abuse among teenage boys on the Cape Flats by keeping school gates open after hours. And it’s working: 83 schools are involved in the Western Cape so far, with the finals played in style each season at Newlands. KwaZulu-Natal is on board now, too, with 16 schools signed up to the programme, and negotiations are under way with former Springbok Ashwin Willemse to start a league in Soweto next year.
The life-skills training programme, called Cool Play, is supported by the Laureus Sport for Good Foundation and The Learning Trust and coaches young rugby players to apply the positive strategies they use on the field to everyday life. It is endorsed by SA Rugby, has impressed the International Rugby Board, and a few of Cape Town’s top rugby-playing schools have signed up to it.
Next, O’Mahony wants to develop an equivalent motivational programme for teenage girls through the school network, based on netball.
“If you really want change, get to the women.
“All these projects have similarities. They act as a catalyst, or an agent of change, in whatever environment we work in. And they all attract people to them: donors, the bodies that run the programmes, the teachers, the kids.
“I genuinely believe that, as an individual, you can make a difference, so I continue to just go on trying to prove that to people. That’s my thing. And in South Africa it’s so easy to make a difference. You only have to do the small stuff and the ripple effect is enormous. People don’t realise how powerful they are as individuals,” he says.
It is clear that O’Mahony is a natural motivator of people, whether the focus is rugby, life skills or financial planning. O’Mahony coached first-team rugby at University of Cape Town for three years and says he realised he was talking at his players and that financial planners tend to do the same thing.
“So I did a Lifeline course. I didn’t do it to be a counsellor. I told them from the start that I was probably the least worthy person on the course, because I was doing it for commercial reasons, but I also wanted to be able to support people and become the best financial planner I could be.”
O’Mahony believes that the CFP qualification prompts financial planners to lean too heavily on the technical. “Technical understanding makes a good financial planner, but not a great one. The greatness comes when one learns to ask a good question, rather than give a good answer.”
He quotes the well-known financial planner and author Tim Maurer, who said “personal finance is more personal than it is finance”.
“It’s not about being a psychologist or trying to change people or anything like that, but it is about going after the issues people have with money,” O’Mahony says.
As a result, consultations with new clients are focused on finding out about them, not fitting them into a financial template.
“Before we get to a [financial] needs analysis, which is all about numbers, we ask you to fill in a questionnaire that asks very basic questions about your money experiences. And we do this before the first meeting, so we have read it before you arrive.
“We still start the conversation by asking you why you have come to us, but the point is to tie together money and meaning. For example, a woman comes to see us who says she wants us to set up a preservation fund for her. It turns out that she has a financial planner already, but she wants to know if he’s getting it right. Actually, he is; in terms of returns, he’s getting it spectacularly right. But we ask her how she feels about what he is doing and whether it fits in with her goals. She admits she hasn’t a clue.
“If we know what you’re trying to achieve in your life, we might have to tell you that it can’t be done, but we’ll tie the money and your lifestyle together for you, so you’ll understand why,” O’Mahony says.
The financial planners at Veritas have all worked individually with a life/leadership coach, and very occasionally they have offered this form of support to clients who might benefit from examining themselves and their circumstances before making long-term money decisions.
“When we see an issue that needs to be worked out before a financial plan can be put in place, we’ll initiate the meeting with the coach to start the process. For example, one client needed to put a succession plan in place for his business, but was not sure whether he had chosen the right person. The life coach could assist both parties in their discussions and help them work out whether they would be able to work together.
“We have seen workaholics coming up for retirement without any thought as to what they might do after retirement. This could be a disaster for them, and we advise a meeting with the life coach before making any rash decisions.”
Such support is the realm of high-end financial planning, but O’Mahony believes there is a desperate need to institute what he calls “financial planning lite”, to help people understand everyday financial products.
“Currently, we are doing this by way of group talks, but we need to figure out a way to help more individuals. This is a challenge for both the Financial Planning Institute as a professional body and businesses like Veritas. In time, we will probably offer a service on a limited-time basis, or do it pro bono. We need to look at different strategies to help the community as a whole.”
If O’Mahony has his way, the “lite” treatment would start and end with compound interest.
“My whole job is compound interest. It’s what I call the ‘big secret’ of financial planning. Are you on the right side of it or the wrong side of it? The wrong side is credit card debt and revolving credit.”
O’Mahony is fierce on the subject of credit cards: those that are not paid in full every month, companies pressing credit cards on their customers and what he considers the ultimate insult: being asked by a retailer whether he wants the credit “budget or straight”. “It has to be straight!” he says, aghast.
“Nobody should have credit card debt. If that’s what it takes to get that coat or that television, the fact is that you cannot afford it. That’s the raw truth. I’m the biggest consumer out there, but why would you pay twice the price for something? We have often told prospective clients with credit card debt to come back to us once the debt is settled.”
Twenty years in financial services has clearly not reconciled O’Mahony to the financial illiteracy of the average South African. He recalls talking to the staff of one of his corporate clients.
“One woman was so sharp and on top of her stuff. Then she referred to having a ‘revolving credit’ facility charging 15-percent interest, while also overpaying on her bond, although that interest rate was only seven percent. That is so obviously wrong. The general public do not understand financial products – debt products, in particular. How many people are saving and have credit card debt at the same time?”
O’Mahony believes that financial education should start at home.
“I am trying to encourage my son, Connor, to choose a toy he wants to save for, and then I pay him interest every month. Slowly, he is picking up that if he does not spend the money immediately, he gets a cash injection of interest to help him achieve the goal. Interestingly, if he does not have a specific goal, he becomes a relentless and impulsive shopper with his weekly pocket money.
“My wife, Lisa, and I talk about our overall spending and our spending plans. She used to run a catering company, so she is very aware of day-to-day costs, where I tend to look at the bigger picture and how we are doing overall. We work well as a team. These are very healthy conversations and probably prevent tensions developing in our relationship.”
Given the dire state of saving for retirement in South Africa, O’Mahony is right behind the far-reaching reforms proposed by National Treasury to reduce the costs of saving, among other things. He has just one criticism of the approach: that advice is not part of it.
“Treasury believes that advice is another layer of costs and does not add value. In other words, they think that all advisers sell products, which is not true. That has changed over the past 20 years and there is now a large body of Certified Financial Planner professionals who hold postgraduate diplomas in financial planning, follow a disciplined advice process and adhere to a code of ethics. That is the minimum we require of our advisers at Veritas. Yet most people and most regulators are still unaware of the work we do.”
O’Mahony says that National Treasury is right to point out that fees can have a detrimental effect on your ultimate retirement outcome 30 years from now, but he says failing to save in an efficient manner is no less harmful – and perhaps more so.
“You can do it yourself, and I believe you should be allowed to, but the reality is that very few people do financial planning well on their own.”
National Treasury proposes to encourage discretionary non-retirement saving by introducing a new, tax-incentivised savings vehicle, and O’Mahony believes this is a perfect example of a strategy that would be better backed by advice. Currently, the proposal is to exclude advisers.
“People might know about this option, but that doesn’t mean they will get around to doing anything about it. In my experience, in nine years of giving advice, I have learnt two things: people just aren’t organised enough, so they don’t get these things done; and, subconsciously, they are actually afraid to commit. Then they’ve made the call and what happens if it’s the wrong decision? However, the opportunity cost of not doing anything is unbelievably high.
“If people don’t want advice, they can go to Pick n Pay and buy their savings product at the till, no problem. And they can perhaps get it a little bit cheaper. But if advice is needed, the public needs to get used to paying for it. In the past, you bought a product and the advice was the added value. That is turned upside down with financial advice: you pay for it, but it’s worth it.”
Another concern is the way advisers’ earnings will be structured in future, once the Financial Services Board completes its review of retail product distribution in South Africa. A similar review in the United Kingdom has resulted in a major shake-up of financial advisers’ business models, and O’Mahony has no doubt that the financial planning industry in South Africa will be operating on fees, rather than commissions, in just a few years.
“Many small financial planning businesses won’t survive the transition, and my fear is where all this is going. The barriers to entry are already massive. How will the advice profession transform itself, given that 98 percent of advisers are white? How is that going to change? Are we going to have no more small to medium businesses?
“I don‘t think the authorities have thought this through: how does a young black person start up a ‘Veritas’? Do we have to become this vast entity in 10 to 15 years, employing dozens of people, because no-one can start his or her own business? Small to medium businesses are critical for the economy.”
Then O’Mahony smiles; ever the conciliator. “I would never be a regulator! You can never get it right. I think everything the government is doing is 95-percent correct. I just think they have missed what advice can add – proper advice.”
* The Financial Planner of the Year Award is jointly sponsored by Personal Finance and the Financial Planning Institute.
HOW DOES VERITAS WEALTH CHARGE?
Barry O’Mahony: The initial consultation is free so that both parties have an opportunity to evaluate each other and see if we could, or should, work together. We then take the clients through a number of meetings and the outcome is a written financial plan.
Veritas charges a rand-based fee based on time and complexity, which we quote on at the first meeting. Veritas then charges a monthly fee based on the assets under management. This fee operates on a sliding scale and is reflected in monthly statements. Our clients can cancel this fee at one month’s notice.
We work out how often we need to see each other during the year and in this process we are constantly re-evaluating your circumstances, including such matters as debt management, risk planning, retirement, discretionary savings locally and offshore, trusts and wills. We point you in the right direction when it comes to tax, medical and short-term insurance, through our associates in these fields.
WHY IS IT IMPORTANT TO OBTAIN FINANCIAL ADVICE FROM A PROFESSIONAL PLANNER?
Barry O’Mahony: The main reason is that people don’t do financial planning for themselves – and that’s because they don’t have the time or the inclination. A financial planner can do the following:
1. Put you under pressure at each meeting to get your affairs in order.
2. Help to give money meaning – in other words, to articulate what your lifestyle goals are and then make a plan that will help you to get there.
3. Share the burden of the responsibility of the financial decisions. People left to their own devices get paralysed and do little or nothing at all.
4. Create a living financial plan that changes with your circumstances, legislation and the markets. Financial plans should be reviewed at least annually.
Financial planning done well is about doing the right thing for a long time.