Are Emerging Brokers being unfairly treated?

Liberty’s Khanda Mkhize takes a closer look at the challenges facing the South African insurance industry.

For almost two decades, South Africa has borne witness to significant change. In this time, few focuses have been as deeply touched by this influence as the business environment.

Employment profiles have shifted, corporate policies have been modified and access to opportunity has become a pervasive force within the local labour market. Despite this, several challenges and obstacles continue to stand in the way of meaningful development.

The effects of this lack of development are still acutely felt within the South African financial services industry, particularly with regards to the development of financial service providers for the domestic insurance market.

According to Khanda Mkhize, Executive Head of the Broker Channel for Liberty Emerging Consumer Markets, traditional positioned brokers still tend to be more successful within the established and emerging markets than those who found their beginnings in developing communities.

Although this trend can be attributed to a number of factors, the biggest challenge for emerging FSP (financial service provider) certified insurance brokers is access to resources.

“Traditional insurance brokers are still more successful in the emerging and established markets than those who have come from more humble beginnings” says Mkhize.

“This is because the traditional broker typically has access to established sources of capital. As an emerging broker, it is a challenge to secure the funding required to establish compliance related assets such as a functional office, a compliment of staff and requisite computer networks”.

A lack of resources has seen many talented and proficient brokers within the emerging market claimed by larger firms, says Mkhize.

Although this kind of sustainable employment is a welcome engine of economic growth, it may not be healthy for the industry at large.

“Some of the best emerging market brokers in the business have gone to work for large established firms in favour of setting up their own operations. While the availability of jobs within the financial industry may benefit the country in the long run, the reality is that very few smaller brokerages with a keen understanding of the culture and community associated with the emerging market have found success in recent years”.

Furthermore, Mkhize believes that the regulatory examinations which every financial service provider is legally required to pass before becoming active within the insurance industry are not well optimised towards the long term needs of the industry. Central to this is the lack of category based testing and language variation.

“Current financial service provider compliance requirements demand that prospective brokers pass a standardised examination, regardless of which category they plan to operate in. The nature of the testing and the language used immediately places many candidates within the emerging market at a disadvantage,” comments Mkhize.

“In order to rectify this, the regulator should consider introducing categorised examinations in several national languages. This would make it less challenging for previously disadvantaged candidates to find success.”

Despite this, these individuals should be wary of blaming external factors for their lack of accomplishment,” says Mkhize.

Although entities such as Liberty and the Black Brokers Forum labour tirelessly to encourage the growth of brokers within the emerging market, the reality is that there is no substitute for hard work.

“When all is said and done, potential FSP’s should realise that true success ultimately depends on them. Emerging brokers should not simply blame external factors, but should also look inwards to truly measure their dedication to the craft.” concludes Mkhize.