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Driving authentic transformation to create an inclusive financial services industry

19 October 2021 Momentum Metropolitan

The COVID-19 pandemic has accelerated much-needed and overdue transformation in the financial services industry. To remain relevant, the industry will need to transform from a product-led to a client-centric, advice-led approach, from an exclusive to inclusive culture and finally, from simply achieving growth to striving for inclusive growth that benefits and enables broader participation in society.

In the face of various ongoing consumer demands, plus support from legislative and regulatory changes, it has become imperative that the industry transforms to meet the needs of consumers or face the risk of disruption or worse, even gradual extinction. At the centre of that change is a focus away from selling products, to one focused on advice and guidance, based on a deep understanding of clients’ needs, whether financial and life goals or aspirations. Ultimately, financial advice is a trust relationship that requires a personal and authentic connection between adviser and client.

Another key trend or development in the industry is the need for wider access to financial services and their benefits; this is a business and moral imperative. It is important to change the prevailing perception that financial advice is only accessible and meaningful to wealthy or older, established clients to one that’s inclusive to a more diverse, racially inclusive and a younger spectrum of up-and-coming professionals. More effort is required to support the equitable access to financial services as outlined in the various elements of the Broad-Based Black Economic Empowerment (B-BBEE) goals. There is an urgent need for a diverse, competent and client-centric adviser force representative of its market.

The lack of diversity and representation in the financial advice industry is prompting innovative thinking to position and promote advice-led financial services as a desirable and lucratively sustainable career. As a starting point to achieve overall transformation of the industry, effort and resources are needed to support independent financial advice practices.

Progress has been hampered by three challenges: access to markets, skills deficits, as well as affordable and accessible business funding for practices looking to expand and serve a broader consumer base. And now mid-pandemic, the skills needed to participate and compete in a rapidly changing world are evolving at an even faster pace. This is true for the financial services industry holistically, and the financial advice profession in particular.

The World Economic Forum’s (WEF) most recent Future of Jobs report reflect that roles – where humans advise, interact, and enable decision-making – will retain their advantage and remain stable. The ripple effect of automation and the ever-growing pace of technology adoption mean that the role of the financial adviser is changing.

This means being able to understand clients’ needs and guiding them as they navigate their financial priorities will become critically important for the profession to remain relevant and thrive. Financial advisers need to be able to add value and listen, counsel and coach clients in a way that will enable them to make informed decisions.

Also, in the age of multiple digital touchpoints, robo-advice, and Google search available at the touch of a button, financial advisers need to future-proof their value proposition. They need to prove the value of their advice and ability to improve their clients’ financial health and growth – particularly against a backdrop of ongoing challenges and uncertainty.

To demonstrate commitment to up-skilling financial advisers, Momentum has implemented an industry-benchmarked and world-class Intermediary Coaching Programme. The 12-month Intermediary Coaching Programme is one of three advice-led programmes designed as part of the organisation’s overarching transformation strategy and Enterprise and Supplier Development (ESD) programmes to achieve authentic and meaningful transformation in the financial services sector. The other two are the Momentum Intermediary Development Programme and the Momentum Intermediary Funding programme, which will be introduced soon.

The aim of these development programmes, explains Momentum Metropolitan’s Group Lead of Enterprise and Supplier Development Fiona Ally, is to accelerate transformation in the industry towards an advice-led and inclusive growth future by overcoming the three main challenges that financial advisers in small, medium and micro enterprises (SMMEs) in South Africa typically face: access to skills, markets and funding. One solution, for example is to give participants access to preferential procurement in business supply chains.

Funding for qualifying enterprises (>51% Black-owned with a turnover less than R50 million) is carried by Momentum Metropolitan through its ESD budget. The current ongoing Momentum intermediary coaching programme has 60 Black intermediaries, of which 22 are female.

Since inception of the Momentum Metropolitan ESD Trust, Momentum Metropolitan has, through partnerships with ASISA and other initiatives, supported Black-owned and Black women-owned suppliers, which saw more than 900 small to medium enterprises (SMEs) given over 90 000 hours of support and skills training, created over 2 000 jobs, and seen a 35 percent revenue increase in these SMEs.

“These programmes seek to address market access challenges by building a shared value ecosystem that helps the industry transform to deliver equitable and sustainable growth, thereby enabling economic empowerment,” says Ally.

Driving growth by adding value through an advice-led approach
Bekithemba Mafulela, Momentum Head of Retailisation and EB Distribution, agrees. “For financial advisers to add real value in the future, they cannot simply sell products – they need to move to an advice-led approach; working in tandem with clients to solve challenges and achieve goals that are important to them.”

Enrolling in the Intermediary Development Programmes provides intermediaries and/or participants the opportunity to equip themselves with the skills that financial advisers in South Africa will need in an environment aimed at inclusive growth.

Testimonials from programme participants
“Clients are more discerning and savvier than ever before, so they expect more from a financial adviser than just technical expertise about products – they are looking for a trusted adviser,” says one of the programme participants Gugu Sidaki, Certified Financial Planner (CFP™) and director and wealth manager at Wealth Creed.

“Being a trusted adviser requires authentic, deep connections with clients, and the ability to act as a sounding board, and offer coaching to help guide clients to their own answers,” adds partner Palesa Dube, also a certified financial planner and director and wealth manager at Wealth Creed.

“It offers the framework of how to get the most out of conversations with clients by understanding yourself as an individual, understanding your clients’ needs and relationship with money, as well as your own relationship and emotional connection with your clients, in order to help them arrive at an understanding of what they need to make an informed decision,” says Dube.

Programmes like this represent an important inflection point for the sector. “This is exactly where our industry needs to go, being professionalised,” says another trainee Vishaam Singh, Broker Principal at Arrow Financial Solutions. “The programme helps us make a meaningful impact in our clients’ lives by showing us how to be more attentive and listen to our clients to truly understand their needs and work in their best interests by guiding and coaching them to make their own decisions. It has changed the way I interact with my clients, and has also allowed me to focus on the way I operate.”

Another programme participant, Vivian Khumalo from Momentum Consult, agrees: “The changing landscape and channels in the financial advice space has brought in several threats and opportunities that might render our current practices obsolete and irrelevant. This programme comes as a timely intervention to mitigate against these obvious risks both to the industry and, most importantly, the independent financial advisor by focusing on relationship building, the role of the adviser, behavioural finance and having the right kind of conversations, and ultimately using the principle of coaching as a tool to help others reach their own goals.”

Quick Polls

QUESTION

The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

ANSWER

Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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