A lasting relationship

Advisers have always played an important role in the South African insurance industry and will continue to do so as the Financial Services Board (FSB) and the Financial Planning Institute (FPI) have stressed the importance of this role.

Celebrating industry excellence is an important way to increase the awareness of an adviser’s role. FAnews caught up with Peter Hewett, CFP®, who was named the 2014 FPI Financial Planner of the Year at the FPI Professionals Convention in June.

Over the last five years, Hewett has built Efficient Advise, an FPI Approved Professional Practice™ into an advisory practice with an infrastructure consisting of an operations team and 63 advisers who service over 8 000 clients nationally, ensuring that consumer financial literacy is driven across South Africa.

Core of good business

Hewett says that the core attribute of a successful financial planner is based on building long-term trusting relationships with clients. “This entails getting to know a client and their family on a personal level and ensuring that regular formal and informal interactions continually take place to ensure that the advisor becomes an integral part of their longer term lifestyle and family financial planning,” says Hewett.

He adds that the success of his practice, Efficient Advise, is based on the fact that advisers provide a comprehensive financial plan to clients and their families that covers all aspects of their financial planning and advisory requirements through a single relationship. The value proposition of the practice has been designed in such a way that they are able to provide an exceptionally broad range of services through leveraging from their own expertise and the expertise of others within the Efficient Group where specialist support is required.

A changing environment

The industry is going through immense change, primarily brought about through legislative change and regulation. The responses to these changes by the various industry participants, including product providers, corporate financial planning businesses, broker networks and IFA’s, have been varied and has created a situation where the industry comprises multiple business models covering tied agents, semi-tied practices and truly independent practices, all of which are trying to find the most suitable business model to ensure cost containment as well as retention and ultimately the expansion of their market share.

“Industry consolidation is likely to continue and should be seen as beneficial to the industry because a significantly more structured and robust industry is emerging. There seems to be an initial consolidation bias in favour of tied and semi-tied models but these models will eventually become a feeder for larger independent models, which I believe will remain the preferred channel in the affluent market,” says Hewett.

Adapting to survive

As mentioned above, Hewett reinforces that the industry needs to ensure that comprehensive financial planning, as opposed to single-needs based financial planning, needs to become the industry standard and that this is the only way to build a sustainable financial planning practice.

“Single needs, in my view, will ultimately be fulfilled by direct marketing and online models through low cost product providers where the intention is purely to provide a product, but where a trusted relationship can never be built. You need to ensure that the clients you take on within your practice understand and acknowledge your value proposition. If you take on the wrong clients, they will refer more of the wrong clients to you and you will ultimately need to find ways to accommodate clients that were never aligned to your value proposition in the first place. This ultimately leads to a lack of focus on the ultimate goals and objectives that you would have set for your practice and your intended clients at inception. The bottom line is that it is critical to understand your target market,” says Hewett.

Promoting professionalism

Although the industry has shrunk significantly in recent years, the higher barriers to entry are gradually professionalising the industry, which will benefit all industry participants. “I believe that larger, well diversified, independent financial planning practices, similar to Efficient Advise, will emerge over time,” concludes Hewett.