Embracing change with open arms

It is often difficult for advisers and intermediaries who are under increasing pressure with legislative bodies to maintain the right balance between satisfying clients, and maintaining a competitive edge.

Dan Hugo, Head of PSG Distribution said that, “Assisting advisers to navigate themselves through the sea of technicalities and regulations is part of the value proposition that PSG offers.”

PSG’s Annual Conference was filled with a jam-packed programme that boasted a variety of speakers sharing their knowledge and information to financial advisers and product providers.

Themed ‘Grow with the Flow’, PSG Konsult Chairman Williem Theron said, “If intermediaries are not adapting and growing with the flow, they will not remain relevant. The most important aspect is to look at business practices and models, and to identify how to adapt your methods to aspire to continued success.”

Threats in the arena

There is a school of thought out there that advisers are becoming redundant and they are going to be overtaken by computers and algorithms. Also, the issue of regulation, customer awareness and the number of complaints across the industry is increasing very rapidly and is a cause for concern. Amongst other issues is the threat of direct competition, skills shortages, market competitiveness and inflation. 

According to Jaco van Tonder, Adviser Services Director at Investec Asset Management, the Retail Distribution Review (RDR) at its heart has quality principles in terms of remuneration models, managing conflict of interest, product provider responsibility, etc. "It changes the way an adviser’s payment for services is conducted and therefore, changes the adviser’s value chain. This changes the competitive dynamics around cross-subsidies that existed in the system where larger investors were cross-subsidising smaller investors,” he said. 

Tweaking traditional systems

Van Tonder said advisers need to be very careful when tweaking this system that is built on very fine balanced tradeoffs around parts of the market, cross-subsidising others to ensure equal access. “The principles of regulation are good, but the execution is absolutely critical. You need to be clear so that you do not end up destroying certain segments of the market who will then not have access to certain services anymore,” he continued. 

“The unintended consequence, as Van Tonder mentioned, with client segmentation, is that clients most in need of advice will not be able to afford it, because advisers will spend time with clients who are profitable and this is the old principle. The clients at the bottom end of the line will almost become un-serviced, which is a big problem,” said Riaan Strydom, Financial Planner at PSG Wealth in Port Elizabeth, and PSG’s Financial Planner of the Year 2015. 

“The advisers who can find a service model that caters at the delivery level for clients who are sub-scaled today may benefit. The advisers that get that right will have a massive market because all of the clients are going to be pushed away by their advisers who say they are unaffordable and cannot service them anymore,” continued van Tonder. 

Advisers and product providers should, according to Van Tonder and Ronald King, Head of Technical Support Services at PSG Wealth, engage with the regulator on a regular basis about where some issues arise and where incorrect implementation can cause a problem. “If we show the regulator how it should be done, by being a leading player in the market, and actually implementing this change responsibly, then we almost guide the regulator about how to implement successfully,” said van Tonder. 

Adriaan Pask, Chief Investment Officer at PSG Wealth, believes that competition will drive a lot of improvement in hedge fund product quality and will help to meet customer needs. There will also be greater transparency. “The challenge, however, is figuring out where to generate alpha because there is a race to stay ahead of the competition.”

Van Tonder suggested that advisers should pull the service model all the way through delivery and harmonise their technology engines at their disposal to work with their clients for the long-term. 

Regulatory hurdles

According to Barry Taylor, Director, Financial Intermediaries Association (FIA) and Chairman of the FIA Short-Term Executive Committee, intermediaries and advisers need to inform themselves of regulation because the better informed they are, the better they can influence. “Regulation creates consumer and client confidence and protection. It sustains and creates opportunities for all brokers. It encourages fair competition and protects the integrity of the market. Specifically, RDR assists advisers and intermediaries of ridding the industry of improper practices and practitioners,” he said. 

“If we want to make RDR work for us, we will focus on providing superior advisory service as opposed to a commoditised business. This is where a platform comes insince it is ideally suited to deal with the more commoditised types of insurance business. If we position ourselves correctly, embracing RDR could give us a competitive edge,” said Gordon Whitcher, Chief Executive Officer, PSG Short-Term Administration.

Prepare and make use of the opportunities created by change and turn them into a competitive edge. Obviously there are big challenges, but we need to embrace the opportunities,” he said.

Bertus Visser, Chief Executive of PSG Insure Distribution, believes that RDR will stimulate the industry. Even though there are some concerns, he encouraged advisers to differentiate themselves through advice and not price. He mentioned that segmentation will help with efficiencies and further added that advisers should focus on commercial business as it is more profitable.

Vernon Pieters, Short-term Adviser, PSG Insure Port Elizabeth, mentioned that regulation is here to stay so we need to prepare rather than find fault because that will not help us.

“Advisers should be ‘client centric’ by putting clients first and not leave any window of opportunity open for competitors. They should embrace change and be early adopters of change by utilising resources and enhancing their expertise. They should also spend more time with clients because existing clients are the ones who bring in new clients. The key strategy is to simplify the systems used, the processes and the people,” concluded Hugo.

Editor’s Thoughts:
The theme was befitting for the discussions that took place at the conference as it is evident that in order to grow and flow, one needs to embrace change to maintain a competitive edge. But, is it easier said than done? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.

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