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00:00:09
Speaker 1: Most of us have been told to save and to plan for retirement and invest in the future. But what happens when you do the responsible thing and you still feel completely lost in a maze of financial products and fees and financial jargon? Financial advisor and modern money founder Munir Shumba argues in his new book that South Africa's money system is designed to keep you broke and that the problem isn't simply our lack of financial discipline. So he says.
00:00:34
Speaker 2: Hello, sir. Good morning.
00:00:36
Speaker 1: Right. Let's get into this.
00:00:38
Speaker 2: Right.
00:00:39
Speaker 1: Firstly, tell me about your relationship with money. Why did you want to become a financial advisor? How much of your own advice do you take? Let's get into the mind of Munya.
00:00:56
Speaker 2: Well, I think I started this career 12 years ago. Right. So I got into the industry beginning of 2015. Okay. And at that time, I had just finished my degree in accounting and finance. All right. And I had just come back from the UK, and I was in a position where I could either go down the accounting route and to become a chartered accountant, or I could go into financial planning. At that time, I had a big curiosity in saving. I had a sales job at that time and I was investing every month. And, you know, obviously it was something that I've always been fascinated in the markets. And it was about discovering what works and what doesn't. And I decided to take the pivot into financial advice.
00:01:49
Speaker 1: I want to zone in on the investing.
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Speaker 2: Yeah.
00:01:52
Speaker 1: Can I ask what age you were.
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Speaker 2: At that time? At that time, I think I was 24. Sure. Yeah, I was 24 at that time.
00:01:58
Speaker 1: Now, where does that mentality of investing come from? Because I can tell you one thing now, my darling, and that's that I was not investing at 24.
00:02:08
Speaker 2: I think if you've got excess money, you know, every single month and … I just, well, I was doing pretty.
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Speaker 1: You were young for NSYNC when you were doing all right.
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Speaker 2: Exactly. I was doing well. I was 24 and I had extra money every single month. And I knew obviously the bank wasn't doing me any favors. And I've always been fascinated, even throughout the time that I was studying about saving stocks. But, you know, there's a balance that you need to get right. The balance is, you know, if I need to buy a car in 12 months time, you're not going into the stock market. If I need to be able to save for retirement... What is the best type of RA? It's, you know, this it becomes quite precise depending on what your specific goals are. So I think I was very curious in terms of finding the answers in terms of, you know, what suited me at that particular moment.
00:02:55
Speaker 1: Speaking to you, what immediately what strikes me as your I mean, it seems like a really obvious thing to point out, but I'm talking about like 24 year old man is is is your financial literacy.
00:03:06
Speaker 2: Sure. Which is.
00:03:08
Speaker 1: There is an absolute lack of in this country for various reasons. So an awful lot of what you've just said, an awful lot of South Africans would not actually know what you're talking about, RAs, this kind of thing. And also the idea of even you saying, I had money left, I had extra money. A lot of South African, if you don't have that financial fluency or financial literacy, or even just from like where you come from, in terms of what you've seen and how you've seen money been handled by your parents, their parents, all of that sort of stuff. You aren't in a position, you might not believe you've got extra money, but that's because you are spending, I don't want to say irresponsibly, but you're not being wise to that. Because you could have said, okay, instead of having this extra money, what I'm going to have is a Lamborghini.
00:03:57
Speaker 2: Yeah, well, that never... fascinated me, even up until now. So you were just born different. Yeah, well, I wouldn't necessarily say that, but I've also seen another side where your parents are doing well and then they're not. And that's frightening. Okay. Yes, because my dad fell from the sky.
00:04:15
Speaker 1: Ah, there we go. That's what I'm trying to get to.
00:04:17
Speaker 2: Yeah, my dad fell from the sky and that was scary for me. Okay. And I saw myself in a position where, you know, it's okay to have the Mercedes and the fast car and the bigger house. But ultimately, it's meaningless when, you know, you run out of rands and cents. So, you know, ultimately, it's I think that security or the desire to have that security for me was a hell of a lot more important than looking good in the moment.
00:04:43
Speaker 1: So that OK, so that is that's your what's the name of that fabulous your financial trauma? What's the name of that fabulous you might know? I can't even get to her name now. who talks about financial trauma. You know who I'm talking about. She's written a book. Gosh, you probably also know.
00:04:58
Speaker 2: Yeah, I mean, I think that was probably, you know, something to do with it. You know, that was probably a catalyst. Right. But, you know, but I think, you know, as obviously my career, you know, evolved. Yeah. I think it probably moved on, you know. Of course. You know, from that because, you know, the big problem was, you know, once you get into the minutiae of the industry, is you start to see how ignorant people are in terms of where they're putting their money, how certain products work, and how some of them are structurally designed never to let anyone win.
00:05:32
Speaker 1: Right. Let's get into that. The title of the book is, you're not imagining it, South Africa's money system is meant to keep you broke. In what way and how?
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Speaker 2: Well, I think if you look at the incentives in terms of how the average man on the street is pushed into products, that aren't
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designed to let them win. So there's two sides to this. The first thing is, if you sit down with a financial advisor and you're looking to save for retirement in the first place, prior to 2006, some of the retirement annuities, in fact, not even some, all of the retirement annuities sold in this country had fee and penalty structures that would not let you succeed. And I speak about that in the book. Now, obviously, there's been an evolution in this country. Post-2006, to make those structures a lot more fair. However, today, the vast majority of those products still exist within the old form where they have stringent penalties, where if you make an adjustment, if you reduce, if you stop paying, the cost of investing on those are just scandalous. That's number one. Number two, there's a lack of flexibility within these products, you know, in terms of you increasing, decreasing premiums. And if you do, you get penalized heavily. Now, South Africa has actually moved on from that system post and pre-2006, where there's a lot more flexibility, where the cost of investing drops down to less than half a percent, where previously it's 6% plus. And you might not understand how big a difference, the difference between half a percent and 6% means. But if you just saved 1%, Sarah, on an investment, 1%, it's going to save you up to 25% of the lifetime of your investments. So what more, if you set it in front of you now and you've got two contracts that you can sign, one investment platform is going to be signing you for 0.5% fees for their time tenuity. The other one is you're going to be paying for 6% fees. What do you think is going to be the difference in outcome over the next 20, 30 or 40 years? And all I'm just trying to say to people in the book is that you've got these archaic products which were sold a long time ago and they still exist today in their form because the people who sell them are incentivized through massive commissions. And you have an option to be able to opt out of that system and to move into products that actually work.
00:07:53
Speaker 1: Okay. A lot of us will, okay, so there's probably an awful lot of people who are like, first of all, I don't earn enough money, people believe. I don't earn enough money to justify getting professional financial advice. Second of all, I don't understand what the difference is between a financial advisor and a certified financial planner. Sure. And the independence versus not of those people. And then there's going to be people who perhaps do have a level of financial literacy, but they're almost just kind of sheep in the system.
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Speaker 2: Yeah, yeah.
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Speaker 1: We've got this. This is what they say. We do it. And they're still coming unstuck.
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Speaker 2: So you're saying what is the answer for those people? I guess, yeah. Well, you have to look at it as there's 17 million people who work in South Africa. There's 12,000 financial advisors in this country. So if you feel that you are going to be the outlier, if I can call it that, who's going to be able to get the best possible advice, I'm telling you right now that that's probably not going to happen. So there's an onus on you as an individual to be able to do some homework. It's not on you hoping that... That out of those 12,000 registered financial advisors, you're going to get the elite top, very best one.
00:09:08
Speaker 1: Sure.
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Speaker 2: Who's coming, you know, with the rescue package to come and help you. Right. You understand?
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Speaker 1: That's what I want.
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Speaker 2: Yeah. That's what everyone wants, you know. Yeah. But the people who are ultimately succeeding, especially when you look at this young generation. Go on. And I can tell you now from the youth.
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Speaker 1: Yeah.
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Speaker 2: The youth, they come to me. I'm talking about the guys in their early 20s.
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Speaker 1: Yeah.
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Speaker 2: And they say to me, Monya, tell me, if you can't help me, tell me where to go to do the homework. Yeah. And I'm going to go out there and go and find it. The people who reach out to me, the inbound is inundated with young people who come out there and just say, you know, just tell me where to do the homework, where to do the research.
00:09:43
Speaker 1: But that's refreshing.
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Speaker 2: Yeah, it is. Because, you know, a lot of them look at their parents and their aunts and uncles and they see what happened there. They listen to the horror stories and they sit back and they go, OK, what is the game? So, yes, you might find yourself in a situation there where you're saying, well, you know, a certified financial planner and, you know, everything else. I'm just coming out there and saying, you know, don't just take what you're told at face value. Go do some homework. This is where you can do the research. This is where you can do the homework. This is where the resources are. This is what I'm telling you.
00:10:14
Speaker 1: Yeah.
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Speaker 2: You understand? Yeah. But take that and go and apply your own homework as well, because the information now, quite fortunately, is out there.
00:10:22
Speaker 1: And I think, you know, and I always say this about social media being a double edged sword. In fact, you and I were talking about it before we came on air. But in as much as it's, you know, a hellscape of note in some senses, there are also people doing the Lord's work out there. And putting things like this into very bite-sized, understandable. Because I think that's the other thing. Anything that comes down to your health or your wealth, people go, I don't know anything. I'm guilty. I don't know anything. You do know because you went to university. So I'm going to make that your thing. Retaining absolutely no kind of responsibility.
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Speaker 2: And that's a mistake.
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Speaker 1: Okay.
00:10:59
Speaker 2: You know, that is a mistake. You know, especially when it comes to those two
things, like you quite rightly point out. your money and your health. You know, a lot of the time someone will come to me and say, you know, I have come into a massive inheritance, you know, and what should I do with this money? And, you know, I sit there and I'll ask the obvious questions. You know, you're married, you've got kids, you know, what are your goals? Have you got an income? What have you saved at the moment? And, you know, once we've gone through the whole kind of funnel and we've kind of like distilled to what we think you know, this person can use right now and put away for the future, short, medium, long term. And I give together a proposal and I justify some of the investment strategies. A lot of the time I'll sit there and I say, I think you should get so-and-so to give you an opinion as well. You know? So it's not like a case there that it's, you know, just take what I'm saying as gospel. I need you to be able to understand it. You understand? Because when things start to move and this process starts to evolve, you know for a fact that why things are moving in a certain way. And this is an evolution. To just say, here's some money and do whatever you have to do. That's irresponsible. You shouldn't be taking... And it's hard to make money. It's hard to earn money. It's hard to make a rent. So if that's the case, why would you give that responsibility to someone else without you knowing... Anything that's happening with your cash. So, you know, yes, it's easier. It's easier just to say, you do it. But the problem with that is that we've got enough data going back to 60 years in this country where we realize that that doesn't work. So you have to know what's going on.
00:12:47
Speaker 1: I want to, mid-conversation, direct people to your social media where you're doing great things over there.
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Speaker 2: Thank you.
00:12:54
Speaker 1: Tell the people.
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Speaker 2: Yeah. So, you know, obviously we've been posting for a little while now. I think we started in 2024. And it's called Modern Money with Munya. And, you know, we are also– I've also got a website that links people to, you know, to this book as well where people can get a copy and it's delivered straight to your house. I love that.
00:13:18
Speaker 1: In a rather fancy box.
00:13:19
Speaker 2: Very fancy box. If I may say so. Yeah. And everyone gets that box.
00:13:23
Speaker 1: Can you tell me that? I thought that was just like a thing for SJ. So the first part of the book talks about what we've spoken about in terms of this is why you say that the systems and the products are not designed to help you create wealth. And then the second product really challenges the idea that investing is is simply for the wealthy and the rich. So let's tackle that a little bit because there are people who are going to be listening in now who are like, Mounia, we're not even mid-month and things are looking bleak. This can't be for me, right?
00:13:59
Speaker 2: I don't want
to give too much away, but there's a wonderful story that I like right at the end of the book where I speak about this receptionist who I met right at the beginning of my career. And the receptionist had a very simple goal. She wanted to save for her daughter's 21st birthday. So she was earning four and a half thousand rand a month at the time. This is in 2015. And she wanted to invest 300 rand a month. And we worked out that if she was going to be able to do that until her child finished university, she'd have a million rand. You know? Wait. What? Oh, there we go. It's shocking. And that's the reaction that we're looking for. What? 300 rand? Don't tell me things like that.
00:14:39
Speaker 1: It makes me want to hyperventilate.
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Speaker 2: Oh, I see. So, you know, for this person, the reason why this was so important is I sat down. This is 2015. I said, why do you want your daughter to have a million rand for her 21st birthday? And do you know what she said? She says, Monya, I'll wake up at 4 a.m. from Sochangwewe to make sure that I can get to Santon on time. I take three taxis to get to work. My kid is not going to have to go through that. And what is the number? I said, 300 a month. I said, if you do 300 a month, you can make that a reality. Your only job is to pay. That's it. If you pay 300 bucks every month until she finishes her degree, you can make that dream a reality. If you really want to break that curse, it starts right now. That's the story in the book. So when, for me, the thing is this, what is it that you want to achieve? Let's start there. And what people misunderstand is that it doesn't take as much money as you think. So we break through a budget which actually evolves over the course of the book. And this budget now starts to sit there and you say, you know, previously, if you had X amount going into retirement annuity at these exorbitant fees. This is going to be your final outcome. But what we're going to do now is we're going to break across this budget. We're going to structure it into better structured retirement annuities. And we're also going to bring in another lever, which is tax-free accounts. So tax-free investments, which were introduced in South Africa in 2015, which have been available in other parts of the world for many, many years. In the United Kingdom, as you'll know, you've got ISIS. So we've got the equivalent now of ISIS in South Africa, which can become such a wealth-creating part of your retirement journey in your portfolio. So I'm looking at that and saying, we're going to bring in an ISA. We're going to bring in a better structured retirement annuity. And do you know what we're going to have now? We've now created a lot more money available for you now in the medium term for you to be able to save for your daughter's 14th birthday, 16th birthday, 21st birthday. Whenever you want to off-ramp, that now is available to you. But, you know, we're not talking here about big bucks. You know? And for
your information, not to give anywhere from the book, that journey, that 300-rand story is still ongoing today. You know? The 21st birthday, which was in 2036, is now 10 years away.
00:17:03
Speaker 1: You know what it is, Monia? So a few years ago, BK, before kids. Yes. I, you know, and I was that, I was going to say I was that young person. But I mean … young, free, single in the sense of didn't have any like real financial obligations. It was kind of, you know, rent, car payment, whatever. And I had a certified financial planner on the show a long time ago, 10 years ago. And we would chat during the segment and I would kind of say, oh, you know, yeah, but I don't have any money. Can you imagine? I had no kids and I thought I had no money. I didn't know what was coming. And she kind of called me out and was like, it's time to, it's kind of time to, get together a little bit.
00:17:45
Speaker 2: I think they're all right. You know, if you think it's tough now without any kids.
00:17:50
Speaker 1: And she revolutionized. And I'm not sitting here now saying, and now I'm laughing and I'm a millionaire. I'm not. But sometimes it takes someone to be a little bit honest with you and be like, no, no, no. But also to offer you a perspective that you haven't seen. Because again, now we fast forward and here I sit now and I don't check in with her all the time. But sometimes when I do and I go, and she goes, no, no, no. And it's a different perspective.
00:18:15
Speaker 2: Sure, sure.
00:18:15
Speaker 1: She's not living the hand to mouth, not saying I'm hand to mouth, but you know, that thing of the school fees and this, where you almost can't see the wood for the trees. It's sometimes about that other perspective of somebody coming in and being like, if exactly if you just, all you need to do is that. And you kind of go, oh. And also for me, when you're in it, it's the immediacy of it, right? It's like, it's now, it's now. Whereas actually, I got one of those stash accounts about three years ago.
00:18:46
Speaker 2: Okay, I know the... Yeah, yeah, yeah.
00:18:50
Speaker 1: And you might have thoughts on that. But the fact of the matter is, I set it up to kind of do its thing. And in the background, it's just kind of quietly been doing its thing. And then when I look in there.
00:19:00
Speaker 2: And I go, oh! Isn't that interesting?
00:19:03
Speaker 1: Okay.
00:19:04
Speaker 2: Now imagine... If the poo.
00:19:05
Speaker 1: Hit the fan tomorrow, you know.
00:19:08
Speaker 2: Okay, now let's combine that with the plant.
00:19:12
Speaker 1: Okay.
00:19:13
Speaker 2: So now we do the exact same thing. And I'll sit down with a young person or anyone of any age. And they might have finished university. They might be starting for the first time. And, you know, young, single, and carefree like, you know, you mentioned before. And for me, the question then is, right, in five years' time, you know, I mean, in fact, if you had a kid tomorrow, it's still another six or seven years. Until they're going to grade one.
00:19:40
Speaker 1: Yeah.
00:19:40
Speaker 2: Okay. So if we started to do a grand a month today, 500 grand a month today, do you know what that is going to be worth? by the time they're going to high school? Yeah. Do you know what I mean? I mean, sorry, junior school. Yeah, yeah. And then they said, well, Munya, I'm not having a kid today. You know, we still need to establish ourselves or whatever. So I said, and that is exactly the point. So we're still 10 years away. So let's stretch this out even further. Let's now say you're going to put this away for the next 10 years. If you had half a million rand by the time the kid is going, you know, from doing a grand, a grand and a half a month, do you think that's going to make a meaningful impact in your life? Absolutely.
00:20:19
Speaker 1: Okay.
00:20:19
Speaker 2: So what is stopping us now being able to say, we're going to take a slither from your income right this minute in time, and it doesn't have to be one and a half grand a month. It could be a thousand. It could be 500. But do you know what this is going to be worth in the future? And for me, it's that perspective of saying, I'm not trying to stop you. having a good time and being carefree and doing all those other things. But I'm just trying to show you that it doesn't take a lot to have a big impact later. Case in point yourself. Stash. Yeah, yeah. Look at that. You know, you barely paid attention to it.
00:20:51
Speaker 1: Yeah, I really didn't.
00:20:53
Speaker 2: But using your own words. Yeah. If shit hit the fan tomorrow.
00:20:56
Speaker 1: Oh, sorry for that. Sorry.
00:20:58
Speaker 2: Sorry, folks. Sorry, folks. Right. Sorry. If anything went wrong.
00:21:02
Speaker 1: Yeah.
00:21:03
Speaker 2: You know, tomorrow, you know that you'd be able to look at it and say, I'm OK.
00:21:07
Speaker 1: Yeah, yeah, 100%. I love how you think. We need to wrap up.
00:21:12
Speaker 2: Sure.
00:21:12
Speaker 1: You need to come back on the show. I think we need to get you back on because I think people, I mean, obviously people online have fallen in love with you and I know that our listeners are probably going, yeah, this guy, we like how he thinks. We like how he thinks.
00:21:25
Speaker 2: Thank you.
00:21:25
Speaker 1: Just remind us again how we get hold of this.
00:21:28
Speaker 2: So it's modernmoney.co.za and, you know, we deliver anywhere in South Africa with free delivery. You can get a hard copy book or a paperback book. You can also get an audio book or an e-book if you prefer to read it online. And if you are outside the country, we also deliver internationally, you know, as well.
00:21:46
Speaker 1: What is your hope with this book?
00:21:48
Speaker 2: I just think to give people something to think about, you know, for them to say, I don't have to take things at face value. That's for me. If I had to put it in anything. I shouldn't take things at face value about my money. Yeah. And there is another way.
00:22:03
Speaker 1: Yeah, I like it. I like it a lot. Munya Shumba joining us in studio to talk about his book and just about money generally.