How does 4x on your wills and estate book sound?

The announcement by Capital Legacy that it will acquire Sanlam Trusts from Sanlam Life should be ‘music to the ears’ of local financial advisers, as the transaction paves the way for significant efficiency and scale improvements in the wills and estates market segment. Billed as a strategic transaction between Capital Legacy and Sanlam Life, the deal will also see Sanlam Life acquire a 26% interest in the enlarged Capital Legacy Group. FAnews spoke to Capital Legacy founder and CEO, Alex Simeonides and COO, Brandon Garbutt, to find out more about the transaction.

Accelerating capacity, efficiency and scale

The discussion was upbeat, with worlds like accelerate, efficiency, growth, opportunity and scale featuring throughout. To begin, we asked what the transaction meant to the respective businesses. “As a business, you always want to grow your scale, especially if your core offering is the delivery of wills and estates; this [transaction] helps accelerate that capacity,” said Simeonides, further describing the deal as a “once in a lifetime opportunity”. Getting access to Sanlam’s distribution channels stands out as a major ‘win’ as it creates immense opportunities, both from a new business acquisition and a distribution point of view. And of course, Sanlam’s strong balance sheet is a significant ‘draw’. 

Few would argue that the benefits from the deal outweigh the drawbacks; but we could not resist asking the executive team about the timing. “FAnews has been watching Capital Legacy’s progress over a number of years, and you have delivered absolutely fantastic growth over that time,” we said. Why do the deal now? Could you not have maintained your historic growth rates by going it alone? “Yes, we have enjoyed exponential growth; to go from where we were in 2012 to having over 600 000 wills drafted for clients is phenomenal,” admitted Garbutt. But the Sanlam transaction opens distribution points that the business could not access previously. “Our main goal is to ensure that there are more wills that are signed and in safe custody across South Africa, and this allows us to go ahead with that plan,” he continued. Market beware: the business is now positioned to accelerate its push into the market. 

The brand experience will remain unchanged

FAnews readers might recall that the wills, estates and trusts business had a major brand relaunch in August 2022, filling an auditorium at Monte Casino, Johannesburg. As such, we wondered what the transaction meant for the brand going forward. “We insisted on our independence and autonomy,” assured Simeonides. “The Capital Legacy [that your readers] know and love as supporting financial advisers will continue as is”. He added that the Sanlam Trust brand would remain relevant due to wills still being placed there. Also, advisers in the Sanlam distribution stable will be serviced with a Sanlam-branded wills offering. Future initiative may, however, include a relaunch of the Sanlam Trust wills offering, specifically to help advisers to get more wills done. 

Garbutt confirmed this view, saying that current supporting advisers, and any new advisers coming on board, would deal with the same Capital Legacy. And that means the same people, same offering, same service, same quality and same management. “This was a strategic play of being able to get out into a broader markets [and reach] distribution points that we have not [reached] before,” he said. The hope is that the change will contribute to a significant surge in wills and estates business. Simeonides pointed out that Capital Legacy produced about 120 000 wills per year versus Sanlam’s 20-30 000 a year from a similar size distribution force. So, there could be potential to 4x that number by improving efficiencies and adviser support. PS, the 4x comment, here and in the headline, is entirely the writer’s invention! “The numbers that we have in terms of the greater fiduciary business, with us bringing the Sanlam Trust business into our own, allows us through economies of scale to be able to service those estates better and give a better overall offering,” Simeonides said. 

Huge gap in the wills and estate market

The media releases announcing the transaction drew attention to serious shortcomings in the South African wills and estates market. For example, the industry-accepted estimate is that 75-80% of South Africans do not have a valid last will and testament. Based on around 23.9 million individuals registered for Income Tax in 2020-21, that suggests a wills ‘shortfall’ of around 17.9 million people. FAnews sees two positives from the media hype around the transaction. 

First, it raises public awareness of the need to have a valid will in place, and second, it presents a huge opportunity for financial advisers to interact with their clients on this critical aspect of financial planning. “We have a programme called Legacy Lessons through which we try and educate financial advisers that when doing a financial plan, you should start with a will,” mentioned Garbutt. He added that the will served as a bedrock or grounding around which financial planning decisions could be made. 

We asked Simeonides whether there were any concerns about getting final regulatory approvals for the transaction. He noted that Sanlam had good relationships with both the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA). “I am very confident that through their experience there should not be any showstoppers for the deal; but we cannot talk for the regulators, it will be up to them to apply their minds,” he said. From a competition perspective the enlarged business will only be administering estates for between three and four thousand of the 200 000 people passing away in South Africa each year. As such, the Competition Commission is unlikely to flag the transaction based on a ‘dominant position’ concern. 

Always moments away from the next innovation

The Capital Legacy acquisition certainly takes the wills and estates business to another level. FAnews asked how quickly the deal would bed down, and by when the market could expect to hear about the next innovation. According to Simeonides, the operational aspects would hopefully be bedded down around mid-year 2023, subject to regulatory approvals for the transaction. From there, “it will take us a good year to really get onto the ground in the Sanlam space and get used to working with each other; our first job is to [engage with] the Sanlam Trust staff and find a new way forward, together with Capital Legacy”. As for the next big thing? “We do not know what waits around the corner, but we know how to take our opportunities when they come”. 

Writer’s thoughts:
They say that procrastination is one of the main reasons why people do not have a valid last will and testament … and it seems the same trait prevents people from seeking out timely financial advice. Can we blame procrastination? And do you agree that the last will and testament is a good place to start the financial planning process? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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