Servicing South Africa's unique market
Research by Metropolitan Life has confirmed that the South African entry level market should be treated uniquely by financial services providers in the way they are given advice and sold products
South African consumers look to their financial services providers and consultants to give them advice that is appropriate to their financial situations. There are distinct differences in the financial goals and needs of all individuals, but regulatory bodies and financial services providers cannot define rules and parameters for governing the industry and providing services based on individual needs alone. Financial services providers also acknowledge that there are two main distinct markets: the entry level lower-income market and the upper-income market, with the middle market overlapping into both of these markets. Metropolitan Life has recently uncovered, through an extensive research project into the entry-level market, that the differences between the entry-level and upper-income market need for advice extends beyond their assets and bank accounts.
Berniece Hieckmann, head of marketing and product development at Metropolitan Life says, “The differences between the two income groups depend on how they prioritise their needs. The upper-income market has a continuum of choices, whereas the entry-level market, due to affordability constraints, has to choose which of their financial needs they can afford to satisfy. Their need for a dignified funeral and providing and caring for their loved ones usually takes precedence over any other form of protection or retirement provision. This is clear through their preference for funeral products and education policies to provide for their children’s education.
Hieckmann also says that the type of advice that entry level market customers need differs depending on their knowledge of and attitude towards financial services. There are broadly three different types of customers who seek advice from consultants. “The first will usually look to their financial adviser to tell them what to do because they are not confident of what they are doing and they would rather trust the consultant to make the right choice for them. The second will ask the consultant to educate them further and explain to them what all the terms mean, so that they can empower themselves to make an informed decision. The third is the more financially savvy customer, who will ask for all the information, conduct their own research, make comparisons between the products and then ask for space to make their own decision. All of these customers will refer to the above as “advice”.
The lack of financial literacy amongst South Africans has been a key focus for the financial services industry. A research document released by Finscope in 2009 revealed that there were high levels of misunderstandings or no knowledge at all of key financial terms. “Three years later the situation hasn’t improved significantly,” says Hieckmann. “It is difficult for a person to articulate what they would like to see in a financial product when they have little experience of financial services. We need to put more effort into financial education before needs-based research will render real insight into the needs of the entry-level market. Metropolitan also prefers to employ advisers from the communities that they serve as this makes the rapport and learning process easier and less intimidating for our customers.”
Metropolitan has been servicing the entry-level market for 114 years. The business conducts research into their target market on a continuous basis, but what was different about this research project is that Metropolitan wanted to gain deeper insights into how their consumers view the financial services industry and the psychology behind their financial decision.
“This research has indicated to us that we are on the right path with regards to how Metropolitan conducts business with the market. We ensure that our consultants are from the communities we do business with, they are trained to sell the appropriate financial products and are passionate about imparting information and education to our customers,” says Hieckmann.
