Interview: Old Mutual Financial Advisor talks about early investments

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Many people don’t seem to be investing in shares due to what people say or have seen with collapsed stock brokerage company like Nyaga.  But one great advantage of investing in shares is that you can see your money grow and later enjoy the benefits that come with it.

Julius C Nduati Kariuki,Financial Advisor with Old Mutual Services Nakuru
Julius C Nduati Kariuki,Financial Advisor with Old Mutual Services Nakuru

Lately, we have seen companies listed at NSE winning government tenders to construct infrastructural projects such as wind energy. This is a great opportunity to shareholders of the company participating in the projects and a benefit to Kenya’s economy.

Mercy Nduati sat down with Julius C Nduati Kariuki, Financial Advisor with Old Mutual Services in Nakuru County to get an insight on why it is important to invest in shares early. Here is the interview:

Give us a brief bio of yourself and the role you play at Old Mutual Securities: I was born more than sixty years ago. I attended Gatanga Primary School-Murang’a and Kenyatta Secondary School Division -Nairobi in the late1960’s. In the early Seventies I obtained a Diploma in Agricultural Education at Egerton University. I worked in the Seed Industry for eleven years. In early nineteen nineties, I went back to Egerton for a degree course. Later I sat for KASNEB –Certified Public Secretaries Examinations and attained the title of Certified Secretary. Since 1976, I have shown a lot interest in securities investment. I do advise clients to trade in securities. I have attended a number of Seminars organized by the Institute of Certified Secretaries of Kenya facilitated by Capital Markets Authority (CMA), Nairobi Securities Exchange (NSE) and Central Depository and Settlement Corporation (CDSC) on pertinent issues pertaining to securities. I have hands on experience having worked for Nyaga Stock brokers Ltd (under statutory management) and Standard Bank Group Securities (SBG Securities LTD). Recently, I was appointed an Agent for Old Mutual Securities Ltd as a financial advisor for the firm.

Who is Old Mutual and what are its objectives are?  Old Mutual Securities is a securities trading company licensed by the Capital Markets Authority for the purpose of facilitating trade on the Nairobi Securities Exchange (NSE). At Old Mutual Securities, we believe fact-based research is a crucial part of any investment decision. Research expertise is at the core of our value proposition to our individual and institutional clients.

What motivated you to become a financial adviser? Having worked as an extension officer, a teacher in public schools and residing in town, I found it appropriate to engage in a business related enterprise. The trading in Securities combined well with Company secretarial services.

Are there any terms that one needs to understand before investing?  One must open a Central Depository and Settlement Corporation (CDSC) account in order to trade in shares. This will facilitate direct crediting/debiting of securities to the client’s account since these days physical /hard copy certificates are not issued or used as proof of ownership.
Dividend: sum of money paid by a company to its      shareholders out of its profits.
Immobilization: All share holders who hold physical certificates are expected to convert them into electronic form. This process is known as immobilization. The shareholder should approach a stockbroker or a custodian and surrender the share certificates. Different company registrars have different requirements for the immobilization process.
      Transmission: This is the process of transferring securities from deceased to beneficiary. There are specific requirements for the transfer of such shares, depending on the companies in question. There are also other services provided such as transfer of shares from one broker to another, private transfer and forms to be filled when pledging shares to obtain loans.

If one is interested in investing in shares, (specifically with Old Mutual), what are the requirements or documents does one has to come with? How long does it take for one to have a CDSC account?
For one to be able to start trading and investing in shares he/she requires the following documents to fill a Know Your Client (KYC) form;
• Two passport size photos,
• Copy of national ID or passport,
• Copy of KRA PIN
• Current bank statement; at least 6 months old,
• Utility bill; either water or electricity bill,
• For corporate, certificate of registration will be necessary,
It takes about four to five working days for one to be able to have an operational CDSC account.

Can one open a CDSC account as a group and what are the requirements for that?  CDSC accounts can be individually or jointly opened. The requirements for opening the CDSC accounts are more or less the same except that both the individuals of the joint account have to present their personal documents. The bank statements should also be for the joint account. Currently, informal groups cannot open a CDSC account; only individuals, minors, Companies, Trustees, and legal entities may open accounts and trade in securities.

After getting the CDSC account, what awaits the individual or group? Once the documents are received by KYC (Know Your Client) team and scrutinized, CDSC number is issued and an internal account is opened. From there, the client can start buying shares. The client will deposit the money in Old Mutual Securities Ltd bank account to facilitate buying of shares. That money will be used to buy investor’s selected securities from the stock exchange. It may be important to monitor the economy in relation to the listed companies so as to decide shares to trade in and why. The investor can consult, Old Mutual Securities staff, for advice on the shares or stocks to trade. Similarly, the client can issue an order to assist in sale of shares. For payment, the client must fill a payment requisition form.

Who is your target audience when it comes to investing?
Mostly employed persons, self employed, business people, college students and farmers will be recommended to start investing in shares.

In your opinion, which are the best shares or companies to invest in that you would advise investors to invest in and what is the minimum requirement that one can invest in? By nature of business the company does, the returns take long to be redistributable to share holders. Hence, one should consider this while buying shares. Most manufacturing companies and real estate companies may generally be classified as long term while the banks, insurance companies and the telecommunication sector may be classified as short-term buys.

Are there shares that one can invest in for long term or short term purposes? In my opinion the following companies may qualify as long term and short-term buys.Long-term buys include Banks- Equity, KCB, HFCK, NIC, Commercial-Uchumi, Construction-ARM, BAMB, Energy-Total, KPLC, Insurance-CIC, KNRE, BRITAM and Investment- Centum and Transcentury Limited.

Are there any benefits one is guaranteed when you invest?
Yes there are. For example, when you invest in a Company you become a shareholder and that guarantees ownership of part the company.
– One shall qualify for dividends which is distributable profits payable at the end of a trading period.
– Some companies issue bonus shares to existing shareholders.
– Shares may be used as collateral /security when borrowing loans.
– Shares appreciate in value – capital gains.
– Shares are better than holding cash in the bank as shares can easily be converted into cash.
– When you buy shares, you become an owner of the company and you have a say and voting rights in the management of the company.
Normally what is saved should be invested, so shares offer a safe and secure means to achieve this. For instance, shareholders who bought Barclays Bank shares in 1986 at Kshs.1600.00, today, own 34,180 shares valued Kshs. 581,060.00 notwithstanding the amount of annual dividends paid. In the long term shares offer a safe way to thrive and prosper especially where one can diversify i.e. buy different companies.

Define entrepreneurship and its role in the society: Entrepreneurship is where a person comes up with ideas of starting a business or an organization. The business will aim at providing goods and services so as to satisfy consumer demands while getting profits in return. The entrepreneur develops a business model, acquires the human skills through employment and other required resources and is fully responsible for its success or failure. Small businesses that come up through entrepreneurship are a major source of job creation, income generation and poverty reduction. This in return contributes significantly to national economic growth.

Do you think Nakuru County and its leadership supports entrepreneurship in any way and does it have any financial capability to support entrepreneurs and entrepreneurship?
Nakuru County has come a long way in supporting entrepreneurs and entrepreneurship as a sector. This can be seen by the recent changes implemented by the county government in constructing, restructuring and renovating old buildings. The town witnessed by the demolition of very old poorly maintained buildings giving room for the construction of new ones. Infrastructure, especially the road networks in the county have been improved thereby increasing efficiency in transport of goods and services. Installation of street lights ‘mulika mwizi’ has improved the town’s security and made it convenient for people to do business even at night. Vendor stalls have been erected in appropriate places bringing reorganization in the town. Tidiness has been maintained thereby protecting its name as the cleanest town in East Africa. All this is in the aim to provide a conducive business environment.

What are some of the challenges you experience as a financial adviser or broker? The challenges are many. Many people remember the erratic behaviour of Safaricom shares. Everybody wanted to buy the shares. They applied for the shares and the allocation was pathetic. Most people were allocated less than 20% of the number of shares one had applied for. Some investors took loans to buy the shares and almost immediately the share prices rose to Kshs.7.00. Unfortunately, it so happened that the share prices plummeted to Kshs.2.00 and the investors got disillusioned. Things changed only recently when the price started rising to nearly Kshs.16.00. After this, the Safaricom I.P.O. (Initial public offer) shares became hard to sell. In 2013, just before and after the general elections, investors were cautious due to the uncertainty that prevailed. Foreign investors held back and reduced their investment in the Kenyan economy.

They feared the return of 2007-2008 political violence. Fortunately, after the elections, economic activities resumed and investment picked up. Another challenge is when there is a mismatch between the order price and actual prevailing supply or demand price; the order may not be executed. This may cause some dissatisfaction with the client.

What is the future of investing in Kenya? Last year, Kenya issued Eurobond and it was received well by international investors. This showed that investors had confidence while investing into the country despite the numerous terrorist attacks that have been experienced in some parts of this country.However; the most affected sector was the tourism sector to the extent that some countries issued adverse travel advisories to Kenya. This led to the decline in the number of tourists visiting. The future of investing has a great potential to grow due to the steadily increasing number of individuals in the economic middle-class. The increase in cash flow from Diaspora means that if wise investment decisions are upheld, then Kenya will have a brighter future.

The prevailing political climate is conducive to investing in various sectors of the economy. Though corruption, lack of transparency in the award of contracts and tenders might give investment a negative a picture.

What advise would you give to those aspiring to be like you?
Start saving early and invest for a less stressful future.

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