The wisdom of wealth – an interview with Martin Riekert

Blue Chip speaks to Martin Riekert, Executive Head of Retail Investments at Momentum Investments, about his success and the success that follows him.

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Martin Riekert, Executive Head of Retail Investments at Momentum Investments, started his career at Momentum early in 2008. During his first years, he was responsible for the technical and actuarial function in Momentum Wealth, where he learned the finer details of the Wealth offering and product suite.

He fulfilled various product development roles in Momentum Wealth, which gave him great exposure across the wider business and preparing him to step into his current role. Blue Chip speaks to Martin about his success and the success that follows him.

Please tell us about your academic path to date.

I completed my BSc Actuarial and Financial Mathematics degree at the University of Pretoria, and after that completed a Post Graduate Diploma in Actuarial Science at the University of Cape Town. Like most actuaries, I started with my actuarial board examinations directly after university and completed these late in 2009 – that made me a Fellow of the Actuarial Society of South Africa.

What are the defining highlights of your career?

My career in product development gave me incredible opportunities for exposure to the wider investments business, and all these experiences contributed to my career path to date. It not only gave me technical exposure on the products and solutions – the ins and outs of financial products – but it also allowed me to gain exposure to a wide range of disciplines – pricing, finance, consumer behaviour, information technology, marketing, distribution and service and operations.

The most significant contributors to my career at this point have been the leaders who have influenced and mentored me into the person and professional that I became. I truly value the potential and impact of leadership – I have seen it first-hand in my career.

What do you deem to be the most critical component of financial success?

Momentum has done extensive research on financial wellness and the journey to financial success. A common characteristic of individuals who have achieved financial success is the presence of a financial plan. This might sound over-simplistic, but it certainly makes sense – to achieve financial success, you need to know where you are heading, as well as the journey that will get you there – hence a plan!

“A common characteristic of individuals who have achieved financial success is the presence of a financial plan.”

It is in this context that we, at Momentum Investments, really believe in the value of financial advice. The financial advice process helps you to identify the goals that you and your family want to set for yourself so that you can articulate a clear and implementable plan to achieve these goals.

I want to add that it is quite important to commit to sticking to the plan. We often see that clients have the best of intentions when starting the investment journey but deviating from the plan often results in sub-optimal outcomes.

Please tell us about the industry benchmarks that Momentum Investments has fashioned.

Many investment solutions in the market provide benchmarks or targets that are not always aligned with the needs of clients or the way that financial advisers give advice. We believe that our approach of outcome-based investing can address this gap directly. Our core range, therefore, has inflation-related targets – something we believe fits into the financial advice process, and helps financial advisers to manage the expectations with their clients. Although these targets are not guaranteed, our outcome-based investing approach attempts to maximise the chances of reaching these targets and the relevant risk metrics that are associated with each solution.

Outcome-based investing is about placing the client’s goals at the centre of the investment process. Our approach is more than an investing philosophy – it’s a belief system defining the way we manage and grow clients’ investments. We never take shortcuts with short-term solutions for their long-term goals, and we help to show them that future goals cannot be achieved by relying on past performance.

Momentum offers various solutions that cater to different clients’ needs, such as growth, protection and income.

Please provide an overview of the products that Momentum Investments offers in this regard.

We recognise that clients have different investment needs throughout their lifecycle. We often think of ‘capital growth’ as the only investment outcome that advisers and clients need to solve for – and our inflation-targeted range of solutions discussed earlier will certainly address this capital growth need. But often clients also need to solve for income needs or are looking for investment opportunities that also provide some capital protection. Our outcome-based investment range, therefore, includes additional solutions that also address these needs of clients.

In addition to our market-linked solutions described above, we also offer a range of guaranteed solutions that can be utilised to address these needs of capital protection and income – all of these are also outcome-based, as it directly solves for the client’s investment outcomes.

In the current economic landscape, uncertainty is the only certainty – that and the assurances Momentum’s guaranteed solutions offer. Considering the uncertainty around Covid-19, please expand on Momentum’s guaranteed solutions range and the assurances that your products offer.

For many clients, the world of investments can be daunting, especially if their capacity for risk does not allow them to deal with the uncertainty of markets. And during uncertain times – of which Covid-19 pandemic is undoubtedly one example – we see that these unknowns are affecting investment behaviour and often result in an increase in demand for guaranteed solutions.

Martin fulfilled various product development roles in Momentum Wealth, which gave him great exposure across the wider business.

Our guaranteed solutions offer a range of solutions that either provide a guaranteed return over a fixed period or a guaranteed level of income. Giving a client exposure to these solutions – even if it is just a portion of their investment portfolio – helps them to introduce stability in terms of what the client can expect. This can provide peace of mind to clients as they know that their money is safe, even if the markets are volatile or provide unfavourable returns.

What advice would you give advisers about how to manage their clients who are currently going through a difficult time?

I believe that financial advisers are becoming so much more than only individuals who give their clients financial advice. They will increasingly start to become ‘financial wellness’ to their clients, and therefore play a meaningful role not only in giving advice but also in coaching and guiding clients through an ever-changing environment.

At Momentum Investments, our outcome-based investing philosophy is anchored in a belief of ‘staying invested’, as we have seen that clients often destroy value by reacting too quickly when markets are volatile. I will therefore encourage financial advisers to continuously engage with their clients through volatile and uncertain times – not to review and react to the markets, but to give clients comfort that their original financial plans are still relevant and that there are benefits in sticking to this plan.

Your brand proposition is ‘With us, it’s personal’. How so?

Most people who invest do so for a personal purpose. In some cases, it is to be able to afford an income during retirement. In other cases, it’s for a dream of sorts or for leaving a legacy. Regardless of the why, this is a personal journey, and it matters deeply to each individual. We want to help people and their financial advisers on that journey to financial success.

“By building these lasting relationships with financial advisers, we can improve our understanding of the needs of both advisers and their clients.”

One thing that stands out for me in my career at Momentum is that collaboration is part of our DNA. We have a proud history of partnerships with financial advisers, and more recently, we started to go back to these roots. And the people who work at Momentum Investments demonstrate this in how we engage with advisers and their clients.

By building these lasting relationships with financial advisers, we can improve our understanding of the needs of both advisers and their clients. This enables us to enhance our services and solutions to truly address their personal needs.

What would be the typical profile of a client considering a guaranteed product? 

There is no typical profile as it can differ vastly given the circumstances of the client – as it is personal. This is exactly where individual financial advice is valuable as it considers each client’s unique circumstances.

However, guaranteed products typically resonate with clients who are on the lower end of the spectrum of risk tolerance or risk appetite. These clients often prefer investment solutions that provide more defined or predictable returns or proceeds.

This does not mean that only risk-averse clients should be interested in guaranteed products. We believe that guaranteed income products like life annuities should form part of most retirees’ investment portfolio as it provides a portion of guaranteed income. This guaranteed portion can potentially be earmarked for the minimum income required during retirement for living expenses. This portion of a retiree’s income can therefore be secured with a life annuity, which will then be unaffected by changes in the markets or interest rates.

Other types of guaranteed products can be used to diversify a client’s investment portfolio and give a different return profile. The important thing is to consider it in the context of a specific client’s needs and circumstances, which again brings us back to the necessity of individual financial advice.

Historically, guaranteed products have often been regarded as somewhat opaque. How are your guaranteed products structured and what is guaranteed?

The main purpose of structured products is to provide certainty in terms of benefits or investment returns. It attempts to ‘hide the wires’ of investment complexity, and it should provide simple and easy-to-understand investment proceeds. The investment outcomes of these products should therefore be transparent and clear.

Our guaranteed products aim to deliver on exactly this – simple and predictable investment outcomes that provide more certainty to clients. The guarantee offered can either be in the form of a capital guarantee or a minimum return over a predetermined investment horizon.

Alternatively, a life annuity – also a form of a structured product – can provide certainty on the level of income that a client can expect over the remainder of the client’s lifetime.

Do you offer different types of guaranteed products, and if so, what would the different types be, and their benefits?

There is a wide range of products, but I will focus here on two types of products. The one category is where the proceeds of the product are fully guaranteed and predictable. Examples of these solutions include guaranteed endowments and life annuities. Both products provide certainty on the benefits and proceeds that are provided to the invester – either a guaranteed capital return after a five-year period or a predetermined level of income that is payable for life.

The second category is where a portion of the benefits are guaranteed, but the client can potentially still benefit from positive market movements over the lifetime of the investment. An example of this is Momentum’s Enhanced Growth Option product where we offer a minimum guaranteed return over a five-year period, even if markets do not perform over this period. A client can also potentially receive enhanced returns if markets do perform well over the investment period.

These are therefore structured products that offer the best of both worlds – a minimum capital guarantee if markets perform poorly, but also potentially an improved positive return if markets do provide favourable returns.

“I fully support that advisers and clients should make informed decisions – including the choice of investment products.”

There is no such thing as a ‘free lunch’, so what are the additional charges that a client has to pay in a guaranteed product versus a conventional market-linked investment like a balanced unit trust? 

There are typically three types of fees on investment products – administration fees, advice fees and investment management fees. These are equally relevant for structured products and unit trusts.

We believe in transparency of fee disclosures as it allows advisers and their clients to make informed decisions. We support the introduction of the Effective Annual Cost (EAC) disclosure in the industry as it requires product providers to illustrate the fees on investment products in the three categories explained above.

I’m sure that you would agree that a financial adviser should never advise on something that they don’t understand. How do you ensure that financial advisers who put clients into your guaranteed products understand them fully?  

I fully support that advisers and clients should make informed decisions – including the choice of investment products. At Momentum, we conduct product-specific training that is a requirement before advisers can support the relevant product range.

And because Momentum Investments believes in partnerships, we also make sure that our consultants and product specialists are always available to financial advisers should they need any support on specific aspects of our solutions – whether it is on our guaranteed product range, or any other solution that we offer.