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Complexity will always require personal advice

18 June 2018Jonathan Faurie
Andrew Brotchie, MD,Glacier International

Andrew Brotchie, MD,Glacier International

Are we ready for this renewed interest? Are we aware of the challenges that we face and how to effectively address them? 

The bulls are coming

Not so long ago, there was a time when South Africa faced credit ratings downgrades and a period where investors were reluctant to commit to long term investments in South Africa. However, it seems as if the bulls are coming to chase away the bears. 

At the recently held Navigate Seminar, which was hosted by Glacier by Sanlam, Andrew Brotchie – MD: Glacier International – said that investors have been inspired by the recent performance of Naspers and have increasingly been taking advantage of opportunity sets that they are seeing in South Africa. 

This is not news when one looks at investments on a global scale. Investments in emerging economies have been rapidly increasing over the past five years. From a sleeping giant, India has been transformed into one of the fastest growing economies in the world largely thanks to international investments. 

Additionally, it must be pointed out that three out of the ten world’s fastest growing economies are emerging economies. 

South Africa may have missed the initial interest in emerging economies, but this ship has not yet sailed away. Brotchie pointed out that local investors, who previously had the majority of their portfolios focused on offshore investments, are looking to refocus their portfolios to allow local investments an even footing. 

Protect the fine china

While the bulls are coming, we must be careful that they do not run rampant and damage the market. There are a few speedbumps in the South African market that may keep them in check. 

The first speedbump is regulation. South Africa is in the midst of regulatory reform and we will see the impacts of newly implemented legislation starting to take root in the market. 

However, this is nothing new. The UK went through similar reform in 2013. Issues such as Treating Customers Fairly, the Retail Distribution Review and technology advancements were all dealt with in the UK before the ramblings of change were heard here. 

“Despite regulatory reform happening in 2013, regulation is still in the front of the mind of any investor going into the UK,” said Brotchie. This may be the case for South Africa in the not to distant future. 

Giving the bulls a platform

The second speedbump is technology. 

In the past, massive stadiums served as the platforms where the skills of a matador were pitted against the skills of the bull. In a sense, the investment bulls are also starting to gain prominence on technology platforms where their skills can be shown. 

Brotchie points out that in the UK, platform investing is the most widely used method of investing. But he questions how long this will last. 

“There are some robo advise led platforms in the UK. But the majority of advice is still being led by advisers. Complexity requires advice. Clients cannot be left stranded without a life boat in sight,” said Brotchie. 

He added that robo advice cannot be completely ignored. Brotchie pointed out that in the UK, the current thinking surrounding robo advice is that it is being offered as a service that complements personal advice. It is being used as a tool to reduce costs at the early stages of investing. 

The song of your people

It seems as if advisers in the UK are increasingly finding their voices in a market that was, at one point in time, seeing a mass exodus of advisers who felt that they did not offer value in the newly officiated market. 

Technology was a major concern at one point in time, but as Brotchie pointed out, this is no more the case. 

“When it comes to technology scale is key. But it is about how you integrate this into your systems and processes. Advisers are no longer scared of technology. In fact, there are more entrants currently coming into the market than there is consolidation. Technology is starting to spill over into South Africa; advisers should not lose their voices,” said Brotchie. 

Tying it together

At the end of the day, positivity alone won’t drive investment markets forward. There needs to be demonstrable signs that investment is starting to pick up and that the South African economy can sustain any growth it experiences. 

We have already seen a taste of it, now it needs to grow. And it can only grow off the back of valued advise. The role of the adviser has never been as important (or desired) as it is now. Clients do not want to talk to a computer when faced with a complex decision. 

However, advisers do need to find their voice in an environment where clients are increasingly engaging with each other over technology-based platforms such as social media and Whatsapp. This is possibly where technology will be key in advisory practices in the future. 

Editor’s Thoughts:
We need to be prepared to run with the investment bulls that are coming towards the South African market. This can only be done by being bold and taking advantage of the benefits that technology, and to some extent regulation, offers. Those who sit in the corner with their worry beads will simply watch the bulls run past.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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