Johannesburg, 6 August 2019: Empowerment investment holding company African Rainbow Capital (ARC) today announced its acquisition of a 25% shareholding in specialist financial services firm Capital Legacy for an undisclosed consideration.
Capital Legacy is a major player in will drafting and estate administration. Operating since 2012, the company has identified improved, efficient and cost-effective solutions to will drafting, estate planning and execution.
These solutions are significant in a South African context where only 1 in 4 people has a valid will in place at death. Inefficiencies in estate planning could result in as much as 30% of the value of the estate being used to cover costs. Furthermore, execution could take years and not months to conclude in the absence of adequate planning. This poses several financial risks to the dependants of the deceased. These include financial concerns, such as a lack of liquidity to settle debts, estate taxes and other legislated costs relating to the administration of the estate.
For example, if a person dies intestate (without a valid will in place) with minor dependants, those inheritances may either be reduced to cash and transferred to the Government’s Guardian’s Fund or transferred to the minors’ appointed guardians – as opposed to what the deceased originally intended. In addition, the estate is distributed according to the laws of intestacy and the specific regulations thereof.
Capital Legacy founder and CEO Alex Simeonides comments:
“When I was a financial advisor, I tried and tested several providers of fiduciary services to get wills drafted for my clients, with little or no success or sense of comfort. In one instance a client passed on and I personally had to translate the industry standard fee of 3,5% of gross assets into a rand value for a grieving widow and then ask her to settle the fee. This experience made me realise there had to be a different, easier and more honourable way to serve clients.
“In the South African context, where access to wealth and preservation of wealth are real issues in our national discourse, one has to be aware that the real cost of dying is what may financially devastate those left behind.”
Capital Legacy offers the services and expertise required to provide the planning and documentation every individual needs to ensure his or her assets are dealt with properly and efficiently after death. This role ̶ referred to as a fiduciary responsibility ̶ covers estate planning, financial planning to provide funds for costs arising upon death, and estate and trust administration.
Professionals with both legal and financial knowledge advise clients about their unique needs, such as whether to include provision for a testamentary trust in their will, and what costs their estate is likely to be liable for one day. In addition to the legal advice provided, Capital Legacy offers financial solutions to specifically make provision for the potential impact of legislated costs associated with an estate.
Alex comments further:
“Since inception in 2012, Capital Legacy has drafted more than 200 000 wills. The number of South Africans who do not have a will still exceeds those who do. Thus far we have demonstrated that our business is uniquely positioned to offer ordinary people a service from which they can benefit significantly. Our solutions are geared towards effectively managing legislated costs associated with an estate.
“We are inspired by the opportunity to assist millions of ordinary South Africans with the financial planning that is needed. Working with over 4 000 contracted brokers, Capital Legacy can reach many more individuals to educate them about the need to have a valid will and plan properly. Currently, we assist more than 5 000 individuals per month with the drafting of their wills. Our experienced estate administrators also facilitate the successful transfer of assets from the estate to those due to inherit, thus assisting the families of people who have passed away.”
The transaction allows ARC to complement its existing financial services investments and facilitate synergistic opportunities between Capital Legacy and companies in which ARC is invested. Capital Legacy stands to benefit from ARC’s empowerment status as it will improve its own empowerment rating. This is likely to result in Capital Legacy drawing more business flows and therefore improving its overall business success.
ARC co-CEO, Johan van der Merwe, comments:
“ARC sees Capital Legacy as a business with great potential in the space in which it operates as its services have broad appeal for so many South Africans in all market segments. Capital Legacy is a solid business and it makes an important difference in the lives of South Africans, which is an ethos that resonates well with ARC. We have great confidence in the Capital Legacy management to meet their business objectives over the longer term.
“We believe that Capital Legacy fits neatly into the eco-system of financial services businesses that we assemble. These businesses would leverage from one another and create synergies for other businesses within our holistic approach.”
“This investment by African Rainbow Capital marks a milestone for Capital Legacy – one that inspires us for the future. Attracting the interest and capital of an investment and empowerment leader like ARC is a significant boost for our business. It will add to our positioning as the most credible provider of various financial products in the estate administration sphere.”
Capital Legacy manages both the assets of deceased individuals at the time of their death, as well as assets bequeathed through trusts. The company complies with the Treating Customers Fairly guidelines of the Financial Advisory Intermediary Services Act.