Cash Deposit Management and Different Types of Cash-Management Servicesstee

Regardless of your investment horizon, investment goals, and risk profile, it is always advisable to have a liquid cash deposit management strategy. It is a wise choice to budget for a space in your investment portfolio for liquidity and physical cash that is available at short notice, or within a specifically acceptable time frame to adjust to your ever-changing needs and circumstances.

With effective cash deposit management, you can earn interest against cash that is otherwise lying dormant in a standard savings account. The returns on this cash will vary significantly over different time frames and depending on where the money is invested. Our skilled professionals at Efficient Wealth place emphasis on this to ensure that the liquid funds invested on your behalf achieve optimal returns.

Read more

Why Consider Cash Management Services?

There are several things a person or company can do to improve the efficiency of receivables and payables. Implementing a strict cash management system is one of them. Cash management is the process of managing cash inflows and outflows. This process is important for individuals and businesses because cash is always the primary asset used to invest and to pay any liabilities. Managing cash flows effectively leads to higher working capital and better operating cash flow. The ultimate goal of cash management is to maximise liquidity and minimise debt.

Read more

Expert financial advisors: 5 ways they can help your small business thrive

Are you thinking of opening a small business? Partnering with an expert financial advisor can set you on your way toward financial success. In the beginning, it is about being passionate about your products and services, gaining and retaining customers, ordering stock, and a plethora of other things seemingly more important than balancing the books.

Opening a new business, or trying to manage an existing one, presents a veritable minefield of challenges that you need to overcome. It can be an overwhelming conundrum, a feeling similar to going on an African safari without sorting out the logistics or retaining an experienced professional to guide you.

However, the advice of professional financial advisors will make the challenges less daunting and, through the services that they offer, you can implement practices to grow your business.

In this article, we will explain a few services that we offer and why you may need them for your business:

Read more

The Value of Partnering with an Expert Financial Advisor

If dreaded disease cover is left disregarded and you or a loved one is diagnosed with a serious ailment, it could lead to financial distress or even bankruptcy.

The long-term effects of the tightening cycle

Dr Francois Stofberg
Managing Director: Efficient Private Clients.

The global economic landscape has been experiencing a tightening cycle for roughly a year, and it is becoming apparent that its effects are both spreading and deepening as disequilibrium becomes more apparent. Recently, we have also experienced that the banking system is likely to be a contributor to the damage being done. The flow of liquidity from cash and credit to assets and spending is critical to the success of economies, and the combination of central banks raising interest rates and draining reserves, coupled with banks experiencing more constrained deposit and capital conditions and tightening credit standards, is likely to constrain the flow of money and credit to markets and economies. This, in turn, is likely to have a detrimental impact on spending and income.

Three major equilibriums and two major policy levers interact to drive markets and economies. The first equilibrium in the rich world is spending and output in line with capacity, which roughly translates into approximately 2% real growth with 2% inflation, a nominal spending growth rate of 4% to 5%, and an average unemployment rate. The second equilibrium is that debt growth must be in line with income growth, meaning credit growth that is not too high or too low, with interest rates that act as neither a major incentive nor disincentive to borrow. The third equilibrium is a normal level of risk premiums in assets relative to cash, meaning that bonds provide an expected return above cash, and equities an expected return above bonds, commensurate with these assets’ risks. The two policy levers are monetary policy and fiscal policy. The economic and market swings that we see reflect the never-ending struggles of the marketplace and of policymakers to achieve equilibrium. In the West, we are far from equilibrium, while in the East, we are closer to it. The closer an economy is to equilibrium, the easier it is to fix problems and the lower market volatility.

In developed economies, high nominal spending, when compared with the ability of an economy to produce more, remains the greatest disruption to equilibrium today. This leads to inflation that is significantly above target, leading to big policy shifts and high market volatility. Despite aggressive policy action, the United States (US), Europe, and the United Kingdom (UK) have not moved much closer to equilibrium. On the margin, the nature of the disequilibrium has shifted from too much inflation to not enough growth, with the risk premiums on assets decreasing relative to cash.

The path from disequilibrium to equilibrium allows for big market swings. When looking at why the economy is in bearish disequilibrium, we see that inflation is too high. Nominal spending, in turn, is too high to bring inflation down and unemployment is too low to bring wages down, and despite nominal growth being too high, the real growth rate is lower than desired. In the end, a weaker real growth rate, that is, an earnings recession of sorts, is required to resolve the other imbalances.

In conclusion, the effects of the recent tightening cycle are spreading and deepening, and the damage to the banking system is a manifestation of this tightening. Markets are in disequilibrium and the high level of nominal spending remains the greatest disruption to equilibrium today. Despite aggressive policy action, the US, Europe, and the UK have not moved much closer to equilibrium. The path from disequilibrium to equilibrium allows for big market swings, which is a frame of reference for longer-term positioning. It is thus crucial for policymakers and market participants to remain vigilant and proactive when managing these risks and when taking steps towards a more stable and sustainable economic environment.

Another Lehman Brothers? Luckily not!

Dr Francois Stofberg
Managing Director: Efficient Private Clients.

Welcome to the world of banking crises, where there is a consistent flow of money and the stability of a shaky Jenga tower! Here, banks can go from being the pillars of the economy to crumbling ruins faster than you can say “subprime mortgage”. So, grab your wallets and hold on tight as we unpack the events that unfolded in March.

Banking crises have a long history, with notable events including the Great Depression in the 1930s, Latin America in the 1980s, Japan and South-East Asia in the 1990s, and, of course, the Global Financial Crisis (GFC) in 2008. These financial fiascos have been like a bad penny over the years that will just not go away. They have been caused by a range of factors, including inflation, unhealthy monetary policy, poor banking practices, and a lack of regulation, to name but a few. They have led to significant economic downturns, widespread unemployment, and poverty, but have also led to reforms and changes in the banking industry to prevent future crises. Despite previous efforts to increase oversight, the current banking fiasco, once again, highlights the need for ongoing vigilance in the financial sector.

The most recent events started with the startup-focussed lender, Silicon Valley Bank (SVB) Financial Group, previously the sixteenth largest bank in the United States (US), which became the largest bank to fail since the GFC in 2008. The reason for the recent collapse was owing to the US Federal Reserve’s (Fed’s) aggressive interest rate hikes over the last year, which crippled financial conditions in the startup environment in which SVB was a notable player. Unfortunately, other banks, such as Signature and Silvergate, followed suit as a potential bank run threatened the stability of the overall banking system. Financial markets initially contracted by 4% but, by the end of the month, when the dust had settled, markets made up more than the initial loss.

Investors may be excused for mistaking the SVB banking fiasco for the Lehman Brothers and the GFC. But even though there are similarities, there are also substantial differences. For one, the GFC was triggered by a combination of a housing bubble, subprime mortgages, a lack of regulation, and oversight problems. In contrast, the current fiasco has been caused primarily by the COVID-19 pandemic, the associated economic downturn, and the structural shift in monetary policy. Furthermore, there is the severity of the impact to consider. The GFC was a global event that led to a significant downturn in the global economy. The current fiasco, while serious, has been largely limited to the US. It has also been well contained by the US Fed, US Treasury, and the Federal Deposit Insurance Corporation, who have offered to provide support where needed. Hence, the recovery and optimism in stock markets.

Locally, despite the impact of load shedding, downgrades, and our recent greylisting, South African banks have been able to weather the ongoing global sell-off extremely well as they were already well capitalised with high levels of liquidity. Additionally, South African banks have some of the best reputations among global banks. In fact, First National Bank was recently awarded the strongest banking brand in the world, closely followed by Capitec Bank. Overall, there are risks and challenges, but the South African banking system is strong and well regulated.

It is because of reasons like these that we continue to favour South African and emerging market equities, especially at a time when developed markets appear shaky. Emerging markets are only now starting their growth engines.

Business Cash Management

Business Cash Management: Investments for Liquidity

Business cash management is essential to ensure your business is ready for growth and to mitigate risks. A good investment strategy makes provision for a percentage of the funds to be liquid for usage on short notice. That said, shorter-term investments don’t deliver the optimal returns of long-term, well-planned investments. The secret is to strike the right balance and invest wisely to ensure your portfolio includes investments for short notice use that also deliver superb returns. Read more

Your Best Cash Management Solutions

Your Best Cash Management Solutions for Investment Returns

Cash management should form an integral part of your long-term financial wealth planning, regardless of your choice of investment strategy. You want to keep a part of the investment portfolio available to use for emergencies and opportunities, as well as maintain a positive cash flow.

Determining which investment vehicles to use for cash management of the portfolio can be a daunting task because the investment returns of the various solutions differ and the liquidity aspect also plays a role in your choice of investment vehicle. See what we offer for money markets and call deposits. Read more