Black Swans and why I want to reintroduce you to NFS

I am sure that you are tired of hearing about COVID-19 and desperately want to move on. We do, too! We all are sick to death of hearing that we are now grappling with a ‘new’ normal and that, actually, it will never feel ‘normal’ again. Ugh!

However, in this blog, I want to tell you how, whilst not one of us could imagine that a pandemic would strike, there are ways to explain it theoretically and that can act as a compass for professionals and their clients as we try to navigate the choppy waters together.

Introducing the Black Swan

Here’s a bit of trivia for you: ever thought about the colour of a swan? No, they aren’t ALWAYS white. It is the only colour the greater majority of armchair and professional ornithologists (in the West, who didn’t travel much, and didn’t have access to the Discovery Channel) knew about. In 1697, however, the Dutch explorer Willem de Vlamingh discovered black swans in Australia. This was a totally unexpected event in (scientific) history and profoundly changed zoology.

In economics, a large-scale, unexpected, and disruptive event is often referred to as a Black Swan event. According to Investopedia, a Black Swan Event is ‘…an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.

I would like to note that there is still some contestation on this theory, but I do think that it serves as a good guide, in the main, to understand that what we are experiencing now, whilst traumatic and unpredictable, is not new, nor unfathomable.

A Black Swan event is characterised by the following:

  • It is an extremely rare event with severe consequences
  • It cannot be predicted beforehand
  • It can cause catastrophic damage to an economy by negatively impacting markets and investments and despite robust modelling, it cannot be prevented
  • Reliance on standard tools can not only fail to predict these, but also increase vulnerability by offering a false sense of security

Below, I want to use our own experience at NFS to illustrate why it is important to access the services of the right kind of professional financial advisors that have four things that act as a life jacket for riding out such an event:

  • A good understanding of economics – The economic environment is dynamic – what happens internationally affects us regionally, nationally, and right down to your province, city, community, family, and household. It is complex – it is influenced by political, social, environmental, and psychological influences, both communally and personally. This is especially important as NFS clients reside in 11 different countries around the world.

    Through the years, I have been, and continue to, contribute and monitor what is happening through various business, academic, and social platforms. Lifelong learning is embedded in NFS ethos, HR, operations, and practice – every staff member has to engage in continuous learning. Every year we accept interns and, for a number of them, provide a career path within NFS and its sister company, The TaxShop.
  • A flexible business model and range of services – One size fit none. At NFS, we operate two business units – a Personal Financial Advising Unit for individuals and couples who require once-off or a range of financial advice and product-related services. You will always know where you stand with us, as our fee structure is clear and up front, and we take the time to ensure that you determine the priorities and the way forward.

    We also have a Business Unit that serves Entrepreneurs who want to establish a business or service and need assistance with developing their business plan as well as those who want to secure and expand their business interests and services. We also believe in partnerships and recommending vetted professionals from the tried and trusted networks we have built up over the years.
  • Independence and diversified sources of income – NFS is not beholden to any insurance company or investment platform for our income. We do not chase commission. We do not push you to buy new or more products if you do not need them. We accept only a small percentage of the legally allowable commission to cover administration costs and pass savings on to you. We can, and do, actively manage investment portfolios. We are able to survive as a company, which means we can continue to help you weather the storm.
  • Years of experience – As the founder and owner of NFS, I have been working in the Financial Services Sector for 35+ years. I have been there, done that, have the bite marks and the t-shirt! We have clients who have been with us for decades and we have a proven record of clients who regularly renew their contracts with us and recommend our services to people they care about.

So, yes! One cannot always predict or prevent bad things from happening. However, during times of extreme crisis, we can see just how robust a company is, how relevant their services and business model is, and whether they will be able to ‘sink or swim’. Now that you know who we meet the criteria

The current Black Swan in the pond, and how NFS responded to it

On the 23rd of March 2019, the President, Cyril Ramaphosa, announced that we had 3 days to prepare for the COVID-19-induced hard lockdown. There was no disruption to our core services, and NFS was fully operational within a week from six different physical sites! This was no mean feat, as staff had to be equipped with the technological and digital ability to work from home. It is a true testament to the ability of our staff to be flexible, learn new ways of working and adjust to a different way of relating to one another as a team. Meetings with clients and staff were shifted into virtual spaces.

However, this was not only the result of, or reaction to, an externally imposed restriction on movement. NFS had been in the process of moving its operations and services online for quite some time before the pandemic. NFS had already made investments in hardware and software and was investigating, testing, and investing in expanding the ways in which clients could interact with NFS. In terms of operations, NFS had already been moving to paperless systems.

This is not our first and won’t be the only visit by a Black Swan

Political, social, and economic upheaval is not new. Pandemics have existed throughout human history. As someone who has been around for a long time in this field, I can tell you that the dictum ‘the only constant is change’ is true. However, before you tear your clothes and heap ashes on your head, I can tell you that there is always hope. Not some fluffy emotion with no basis in reality. In this case, history is on our side. We know that markets take knocks, but, over time, regain their losses.

With a carefully crafted and often reviewed financial strategy, you will be able to come out whole on the other side. This strategy should include:

  • A robust emergency fund
  • diversification of assets
  • multiple streams of income
  • a diverse and actively managed investment portfolio that reflects your risk appetite as determined by your priorities and circumstances
  • a forward-looking tax strategy
  • preparation for retirement

Discussing Black Swans – past, present, and future and how people can prepare for them

NFS is, and always has been passionate about furthering public financial literacy, furthering debate on a range of international and national social, economic, and political factors that influence the markets and lives of all.

I regularly participate in:

  • Community radio programmes – participating in regular slots on CCFM as well as contributions to other stations, such as Cape Talk and SAFM
  • Speaking engagements – speaking at forums, companies, and business networks
  • Information provision – sharing my expertise to those in the industry, as well as with activists and journalists
  • Blog posts and videos – these are available on all major social media networks

Final Words

Life is hard. It is unpredictable. BUT! There is always hope if you know where to look for it, how to plan, how to remain flexible, and can determine who to trust. It is difficult to hold a long-term vision for yourself and those you care about in mind when short-term survival seems all-consuming and disruptive. I hope that you can find and hold onto a sense of peace in the eye of the storm and the successive storms you will inevitably face by anchoring yourself in the words above.

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