Now is the adviser’s time to shine
A new dawn is approaching for the financial services industry. After years of drafting the regulation which will govern the industry in the future, National Treasury is finally ready to make the changes which will promulgate the introduction of Treating Customers Fairly (TCF) and the Retail Distribution Review (RDR) into the industry.
Valued advice has once again cast the spotlight. The importance of offering clients quality, appropriate advice throughout their lifetime is mentioned almost daily.
With this in mind, Old Mutual held the Johannesburg leg of its Advice for Life road show on 21 August where key insights into this new world were provided by a number of key note speakers.
Understand the context
Before any of the speakers could discuss the specifics of TCF and RDR, the economic climate within which the financial services industry operates needed to be established. Independent economist JP Landman said that while South Africa has made significant progress since the birth of democracy in 1994, there are some current challenges that need to be addressed.
“The South African story is really one of the most inspiring stories one can tell. We have made significant progress since 1994 to grow the economy, but now we are stagnating. There needs to be an urgent injection of confidence in this market to address our current challenges,” said Landman.
One of the biggest challenges that we face at the moment is that the population growth in the country is currently 1.6% a year while economic growth is nowhere near that. This has been a problem since 2014 which was the last time that these two figures were even close to each other.
“There is no country in the world where major progress in the country has happened while the economy was growing at a slower rate than population growth. It just does not happen,” said Landman.
A better place
We can be as critical about the Jacob Zuma regime, and rightly so, but what it has done is that it has raised the awareness of the public about what happens in parliament and that we can stand against issues we do not agree with if we feel strongly enough about it.
“South Africa is a far stronger society today than it was in the 1980s. We have an independent media system that is not afraid to openly discuss corruption or any other kinds of shenanigans that we see. We also have a strong court system that holds politicians responsible for their actions. If we can resolve the economy, the future is bright for the country,” said Landman.
Go beyond
So what is the role of the adviser in a world where South Africa has the potential to grow beyond its imagination? Bruce Fleming CFP, 2016 Financial Planner of the Year, said that advisers need to change the way that they approach business if they want to offer valued advice.
“Valued relationships will be the cornerstone of success in the future. Clients are looking for good partners who can relate to the challenges that they face on a day to day basis. We need to look at the value that RDR offers; the best thing is the change from a commissions based industry to a fees based industry,” said Fleming.
A whole new world
One of the advantages that a fees based model offers is that it allows an adviser to engage in lifestyle financial planning with their clients.
“Merely selling a product to a client will not do, there has to be financial planning and assessment of that plan beyond that. Clients lifestyles and demands change, they need products that will be able to change with it,” said Fleming.
While many may feel that this is a difficult task, Fleming said that if the foundation is strong, then there is no reason why a product cannot be adaptable. He was also open about how much time advisers need to spend with specific clients. During the lifecycle of an advisory practice, a lot of lessons will be learned and Fleming said that one of the most important is that advisers cannot spend 80% of their time on clients that only account for 20% of their income.
Having a smaller client base that is loyal who knows that the adviser has their best interests at heart will be a major advantage in surviving the RDR world.
Editor’s Thoughts:
Advisers may be apprehensive about approaching a new world with the context of what is happening with the economy. However, Landman said that this provides advisers with massive opportunities. Clients will need professional advice to navigate the risk that they face, advisers can be these valued business partners. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
