Why Choosing The Correct Investment Manager is Critical.

The news over the past week has been filled with articles about the fraud, the collapse of BHI Trust and the arrest of Craig Warriner. Initial estimates put the amount at R3 Billion at risk with hundreds of clients, some of which had their entire savings invested with BHI Trust.

Sadly, this is not the first time that an event of this nature has affected investors in South Africa or abroad. A few that come to mind are VBS Bank, Mirror Trading International Capital, Tannenbaum, Bernie Madoff and Krion in the early 2000’s.

During the 2008 Global Financial Crisis some investment managers came completely unstuck and liquidated, whilst others continued to operate by attracting new investments to pay out older ones in the hopes of getting back to some type of solvency. A simple case of stealing from Peter to pay Paul. A Ponzi Scheme.

When it comes to identifying someone to safeguard your wealth and future here are a few things to look out for.

  • Is the Financial Services Provider (FSP) duly authorized to provide advice, are they registered with the Financial Services Conduct Authority (FSCA), and do they have a FSP number?
  • Is the person you are dealing with an authorized representative of the FSP, and do they have the appropriate qualifications?
  • Are the returns being marketed realistic?
  • Are you invested in a regulated vehicle such a Collective Investment Scheme (CIS) or regulated investment vehicle? These vehicles are subject to strict laws and oversight by the regulator which provides the investor with additional protection.
  • Clear Disclosure. A legitimate investment manager should provide clear and comprehensive disclosures about their services, fees, and potential conflicts of interest.
  • Does the FSP have appropriate professional indemnity insurance?
  • Scrutinize the marketing material you receive. Does it show the relevant investment details, are there appropriate contact details (no Gmail addresses) and is the FSP number displayed?
  • Is there a presence for the company that you are considering dealing with? Website for instance.
  • Trust your gut. If something feels off or you have doubts about the legitimacy of an investment manager, it is important to trust your instincts and consider alternative options.

Apex's Approach to Selecting an Investment Manager

Our investment philosophy is to invest with renowned and transparent managers who have a proven track record over all financial market conditions, while keeping investing simple and cost effective. 

Our preferred investment managers have been through our internal as well as an external due diligence process. They are highly regulated and demonstrate all the requirements we seek. Most importantly the investment capital is held by an independent nominee, such as one of the major banks.

Unit trusts (known as collective investment schemes) are held under the umbrella of the ASISA (Association of Savings and Investment South Africa) and regulated by the FSCA.

It is heartbreaking for those investors in BHI Trust and it remains to be seen if investors will get their funds back.

Do not be surprised if you see further news about local financial advisory businesses who claim to be “the investment experts” and other intermediaries who promoted the products of BHI Trust being brought to account.