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South Africa’s financial advisers: improving efficiency- but how, exactly?

24 August 2016Insight Discovery

• Message from IFAs to investment managers and Linked Investment Service Providers (LISPs): make our lives easier • Most IFAs thriving in face of challenges that include RDR • 97% of IFAs believe the FSB be doing more to monitor unregulated schemes/products? • Over the coming year or so, the IFAs will likely increase their usage of discretionary investment management (DIM) service • Over the next 12 months, about one third of the IFAs will be looking to reduce clients’ allocations to global emerging markets debt and multi-asset/ high equity strategies • Some 85% of IFAs see new technology and processes as an opportunity, in the coming year or so • Robo-advice is on the radar of most IFAs, but the younger demographic is more optimistic about its potential.

A landmark research report from Insight Discovery shows what IFAs want from LISPs and asset management companies.

Market intelligence firm Insight Discovery has today released its second South African Investment Panorama (SAIP), a survey of 255 independent financial advisers (IFAs). This survey was conducted in partnership with twelve leading financial services companies, including the South African based compliance and industry service provider Moonstone Information Refinery and Old Mutual Investment Group, Morningstar, Pioneer Investments and DIFC Authority.

Notes Nigel Sillitoe, CEO of Insight Discovery: ‘We are delighted that we collaborated with twice as many partners this year as we did in 2015. This says to us that interest in South Africa from outside the country is rising. We are also very pleased that many of our Gold Partners are household names in South Africa, which means that our syndicated approach to proprietary research is becoming more widely accepted here.’

‘As was the case last year, the general business environment is tough for many IFAs. It is still not entirely clear what will be the impact of the forthcoming Retail Distribution Review (RDR) regime. Pressures on prices remain in a downwards direction.’

‘So, the IFAs have a simple message for LISPs and other asset management companies: make our lives easier. That includes providing information, through seminars and other channels, on the outlook for markets, the use of social media to build the IFAs’ businesses and the selection of funds.’

The report identified a number of changes that will take place in the coming year as IFAs look to boost process efficiency and deliver better outcomes for clients. They will increase their usage of discretionary investment management (DIM) services. They will also boost their usage of offshore funds.

Adds Tal Nieburg, Managing Director of Morningstar South Africa, says ‘The research further informs our work to ensure our discretionary managed offerings, investment research, annual adviser conference and other events speak to the evolving needs of IFAs in South Africa during these changing times.’

‘It’s particularly evident that advisers want more information from investment service providers. We support the call for quality and in-depth investment information, delivered through timely and relevant solutions that support the business needs of advisers, as it fits with our mission of helping investors reach their financial goals.’

Insight Discovery’s first SAIP report, in mid-2015, suggested that most IFAs would rise to the challenges posed by RDR, and that many would flourish.

Says Nigel Sillitoe: ‘Events over the last 12 months have vindicated our confidence. Looking forward, many IFAs consider that the industry will be strengthened over the long term by the RDR, as it requires further improvements in professional standards. Our research found that senior IFAs are particularly upbeat.’

The latest SAIP report found that evolution of technology is a key part of the drive towards greater efficiency. Some 85% of IFAs see new technology and processes as an opportunity, in the coming year or so; 15%, as a threat.

This may be because new technology makes it easier for potential clients to access information about investments, a factor which is regarded as an opportunity by 89% of IFAs – and by a greater number of senior IFAs.

Meanwhile, about 59% of IFAs see pressures on advice fees as a challenge for the coming year, while the remainder are optimistic. Senior IFAs are less concerned about fee pressures than are other IFAs.

Almost all IFAs think that the Financial Services Board should do more to monitor unregulated schemes that are offered to investors in South Africa.

Jack Lin, Head of Asia Pacific, Middle East & Africa at Pioneer Investments notes ‘Clients are becoming more informed, more sophisticated and more demanding. It is of little surprise that the fund selection process is one of the most important factors voted by IFAs, when dealing with asset managers.’

‘Interestingly, South Africa is unlike other markets when it comes to fund selection. Besides investment performance, IFAs base their decision on a combination of factors such as fees, independent fund ratings, investment process and company reputation.’

Salmaan Jaffrey, Chief Business Development Officer at DIFC Authority notes ‘IFAs in South Africa and across the region are a crucial source of advice for the channeling of capital and resources to take advantage of the world's fastest growing economies. This report is very timely in ensuring wealth managers are well-positioned to access to information, markets, investors, high professional standards and new technologies.’

‘At DIFC we have created an ecosystem that is home to advisers, investors and financial services firms built on these principles. Providing access to the US$7.8 trillion Middle East, Africa and South Asia region, we are committed to ensuring wealth managers and asset managers can tap into these high-growth markets, while benefiting from a full range of investment vehicles’.

Quick Polls


It is believed that it will cost R1.38 bn a year over the next 10 years to fix Johannesburgs roads. Do you think there is room for partnerships with the insurance industry to assist in this as the industry would benefit from fewer claims?


Yes. Get it done, we face enough cost pressures already, decreased claims would be good.
No. Where is all of our tax money going?
Undecided. If you can prove that there is a correlation between the state of our roads and increased claims we can talk again.
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