Forget the JSE – the action is in financial services industry
Mergers and acquisitions are activities usually associated with a country’s listed companies. When you hear the terms you immediately thing of the Industrial Bank of China purchasing a slice of Standard Bank, Barclays paying big money for a sizeable chunk of ABSA or India’s Reliance Telecom and locally listed MTN trying to thrash out a deal. Truth be told, merger and acquisition activity on the world’s markets have slowed significantly in recent months. The US sub-prime crisis has soaked up spare capacity in world credit markets and left the dealmakers high and dry.
Stakeholders in South Africa’s financial services industry have other plans though. In recent months we’ve had an absolute overdose of merger activity among industry representative bodies. The process started last year when the Independent Brokers Council (IBC) and South African Financial Intermediaries Association (SAFSIA) announced their merger plans. The two broker representative bodies subsequently merged as the Financial Intermediaries Association (FIA).
Brokers and intermediaries do it again
And more recently another independent broker body, LUASA announced that they were in talks with their members to ‘dissolve’ and join the FIA too. The decision prompted a number of criticisms which have been widely covered in the online media. We won’t go into too much detail except to say there were concerns over the mechanics of the merger, particularly where the treatment of existing LUASA staff and membership were concerned. It seems this ‘problem’ can be attributed to poor communication to members during various presentations to motivate the merger.
The remaining issues centre on LUASA’s recruitment performance in recent years and whether the FIA could adequately represent the interests of LUASA members. A combined entity will certainly enjoy a certain ‘critical mass’ in the industry. The FIA represents 2 600 direct members and some 15 500 intermediaries compared to LUASA which has 1 200 direct members and some 500 intermediaries. FAnews Online believes that concerns over poor recruitment and industry representation will be addressed by the larger merged entity.
A merger that makes slightly less sense
And that brings us to the most recent financial services industry consolidation. It seems a number of independent representative bodies in the life and investment fields are going to merge to form a single entity. The Life Offices Association (LOA), the Association of Collective Investments (ACI), the Investment Management Association of South African (IMASA) and the Linked Investment Service Providers (LISPA) have announced their intentions to disband over the course of this year and form a new body in October 2008. Leon Campher has been appointed as CEO of the new association.
Judging by the contents of the press release, the establishment of the new association is already well underway. The LOA announced that the new association’s Risk (Life Insurance) Committee will be chaired by Herschel Mayers, CEO of Discovery Life; with Wilhelm van Zyl, CEO of Metropolitan Life as the deputy chair. There will be five life industry representatives on the new association’s board of directors. Commenting on the LOA member decision to dissolve and join the new association, LOA chief executive Gerhard Joubert said: “I support the outcome of today’s vote and believe that the trend of convergence in the financial services industry has necessitated that the investments and life industry starts speaking with one voice.”
While the four merged bodies all fall under the life and investment umbrella we’re not entirely sure a single merged body will adequately address the needs of the diverse range of members. And there’s one question that probably hasn’t been answered: Is it in the consumer’s best interest for the life and investment industries to form closer ties?
Editor’s thoughts:
The financial services industry has attracted plenty of regulatory attention in recent years. Member organisations have had to consult their members on numerous legislative changes and provide regular comment and feedback to government – often within very short timeframes. While fewer representative bodies may speed up such feedback processes we wonder whether too much consolidation is a good thing. Do you believe that the life and investment industries are better off with a single representative body? Add your comments below, or send them to gareth@fanews.co.za
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