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Association backs intermediaries to navigate the COVID-19 storm

26 May 2020 Gareth Stokes

The Financial Intermediaries Association of Southern Africa (FIA) has its finger on the pulse of the country’s financial advice and insurance broking community. We spoke to two members of the FIA Board to find out what the FIA was doing to guide its members during these troubling times. We also asked them to outline some of the challenges facing the association’s intermediary members in a post-pandemic world.

“The FIA has been in discussion with product providers, regulators, and various areas of government since the start of the COVID-19 pandemic and subsequent national lockdown,” said Peter Olyott, president of the FIA. “These interactions have predominantly sided towards assessing and responding to current events from a small, medium, and micro-enterprises (SMME) perspective , although the interests of all of our members is paramount ”. He extended a word of thanks to industry stakeholders for the positive spirit in which the FIA was received and urged them to continue engaging with the association on areas of concern. 

Survival versus sustainability

Advice-focused financial services providers (FSPs) will face many challenges as South Africa emerges from national lockdown. The cumulative effect of the economic downturn, coupled with the widespread adoption of digital technology in a ‘stay at home / work from home’ world, are expected to drive change in this and other sectors. “The economy, or lack thereof, is a major concern over the short term,” said Olyott. “The financial advice sector is likely to become inwardly focused over the next few months and take an increasingly short term view”. He added that many FIA members would divert attention from long term sustainability and growth to surviving this year and next. 

“The retention of clients will be more challenging in view of the economic conditions that look set to get worse before they get better,” said Barry Taylor, chairman of the FIA Non-Life Exco. He observed that many of the post-pandemic challenges mirrored those faced by intermediaries pre-crisis. FIA members will still have to acquire and retain clients while addressing issues around regulation, succession, and transformation, to name a few. The game changer is that they will have to meet these challenges in an emerging ‘new normal’ business environment. 

Work smarter, not harder

“It should be apparent that working hard and doing the same thing better does not guarantee survival,” said Olyott, who warned that historic cost structures could become a millstone around intermediaries’ necks. It is also extremely difficult to innovate and reinvent a business when one is constrained by yesterday’s way of doing things. “Playing the wrong game in the wrong market could have devastating negative effects in the medium to long term – it is no longer possible for intermediaries or providers to be all things for all people,” said Olyott. He noted that specialisation had become a ‘ticket to play’ in the acquisition, retention, and servicing of clients in both the financial advice and risk disciplines. Taylor added that brokers would face tough competition to retain their books of business against a backdrop of increased competition and more intrusive underwriting. 

Advice practices, whether focused on the financial or risk markets, will increasingly turn to technology for their competitive advantage. But technology is not a guaranteed panacea. “It is not the technology per se which secures a competitive or cost advantage; but rather how the technology is deployed by the business,” noted Olyott. The challenge to financial advisers and insurance brokers is to identify tech solutions that enable them to improve their service offering by, for example, being informed with a more comprehensive overview of client portfolios. Those who shun technology will be left behind. 

The best advice for advisers

Olyott suggested that intermediaries focused on markets where they had critical mass and differentiated knowledge, and then set about doing things differently: “To succeed an adviser needs to know the subject matter inside out, upside down, and back to front,” he said. “Product knowledge is important; but subject matter expertise even more so”. But relationships between intermediaries and product providers will still be informed by robust, positive, and transparent engagement with a view to ensure the best possible outcomes for end consumers in a sustainable manner. 

The industry has emerged from a period during which product providers pledged complete support to their financial adviser and broker partners, whilst also developing disintermediated strategies in the background. Nowadays there is more openness about respective business strategies and a growing understanding that multiple distribution channels are needed, not only for sustainability, but to accommodate evolving consumer behaviours. 

The regulatory trajectory is set

“The FIA has taken an objective approach to the myriad regulations dealing with our industry,” said Olyott. He added that FIA responses to regulation, submitted during the time allowed for public comment, were of a high standard and well-researched and articulated. The association represents a diverse membership based on advice disciplines and size of practice, to name a few. 

This means that it often supports matters on a consensus basis and deals separately with smaller issues that may detract from the general view. Disagreements on proposals that may adversely affect the FIA’s membership are communicated objectively, but firmly, with the regulators. “We have interacted with the regulators on a number of key regulatory proposals in recent months, with positive outcomes,” said Taylor. “One example was the regulatory approval that non-life brokers be paid full commission for COVID-19 premium relief dispensations”. 

South Africa is part of a global community that is undergoing a type of metamorphosis during the COVID-19 pandemic. Consumers will emerge from lockdown with a totally different outlook on how they buy products and services. And businesses, large and small, will have successfully experimented with many digital solutions that were previously thought of as unworkable. “It is pointless to bemoan or defend global developments that will bring about fundamental changes,” concluded Olyott. “We will, however, engage vigorously where we believe there are still things which can be done to change or impact a situation”. He added that there will always be a place for professional intermediaries, across the various financial and risk advice disciplines. 

Writer’s thoughts:
How will smaller advice FSPs navigate the post-pandemic world? On one hand they have access to technology solutions that enable, for example, remote conversations with clients and providers. But they are not able to make the sizeable investment in systems needed to keep up with the large players. Do you believe the current move towards digital everything will help smaller FSPs narrow the gap? Or do they risk falling behind their larger peers? Please comment below, interact with us on Twitter at @fanews_online or email me us your thoughts editor@fanews.co.za.

Comments

Added by Nina Lowes, 26 May 2020
In our business Linktank, we specialise in assisting financial advisors with the selection and implementation of technology into their businesses. Your view that the correct adoption and especially the implementation of technology is of paramount importance aligns with our experience entirely. You can have the best systems but if you don't implement them properly, they will fail. Smaller FSPs are definitely at a disadvantage in terms of trying to keep abreast of new technology and the ongoing costs it brings to their businesses. One way for them to approach this is to think of leveraging technology by setting up "technology networks", i.e. they continue to do business independently but get together to access technology (whatever the chosen system or systems might be) and take advantage of scale to negotiate pricing and other services. Without doubt technology will be a sustainability game-changer.
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