An investment and savings survey of black South African consumers and financial advisors reveals a range of market-leading insights

A recent survey conducted by The Collaborative Exchange and The Association of Black Securities and Investment Professionals (ABSIP), in conjunction with ASSUPOL, Momentum and Mianzo Asset Management revealed a range of market insights as to how black consumers are accumulating savings, how they are dealing with accumulating funds towards retirement, their attitudes and access to financial advice and whether they are anchored in investing in South African companies.

The survey was conducted using both quantitative and quantitative methodologies. ABSIP’s membership base (quantitative) were asked to complete an online survey, where 321 members across all provincial regions provided their insights. To be eligible for the survey, participants had to have household earnings of R20 000 per month, thus representing the higher echelon of income households in South Africa. 78% of the respondents also possessed an Honours or Bachelors university degree.

The survey revealed that black consumers are consciously saving towards retirement (87% of respondents) but are worried that they are not accumulating enough. They have access to financial advice but are rather self-directing their savings by using “new age” technology platforms to gain access to various shares/investment securities. Given the high preference towards self-directed investments, platforms such as Twitter and TikTok played a strong role in influencing investment decisions. Where those consumers were using a financial advisor, they were satisfied with the services that they were receiving, but those that did not use a financial advisor, stated that they did not know what the role of a financial advisor was but had no interest in seeking their services.

Over 60% of the respondents were happy for their investment funds to be invested in both South African and international companies, whereas only 14.7% felt that they wanted to invest in only South African companies as they wanted to grow the local job market. Furthermore, inflation beating returns was the primary investment objective with less that 2% of respondents saying that they wanted to invest in socially responsible companies that take care in the environment. Thabiso Ratshefola, Deputy Secretary General from ABSIP says, “Over 71% of consumers felt that the industry is not solving for the savings and investment needs of their communities in South Africa – which tells me that as an industry, we need to do some serious re-thinking about how to better serve South African communities”.

Furthermore, The Collaborative Exchange interviewed 40 financial advisors throughout South Africa, with an equal mix of black and white financial advisors (60% male and 40% female) and spanning all financial advisor types (bank/ financial advisers, large corporate independent financial advisors and medium to small independent financial advisors).

Banks and life offices are still the main medium, where black consumers get access to advice as they have broad geographical reach and brand resonance. Financial advisors still struggle to get black clients to shift savings deposits from low interest yielding, and inflation destroying products, as the concept of “capital growth” via unit trusts is still not well understood. Low levels of financial literacy, coupled with complex documentation, industry jargon and complex fee structures, were all impediments that financial advisors faced in advising black clients. Black financial advisor businesses are increasingly growing their client base but believe that the industry is not doing enough to ensure the ongoing success of black independent financial advisors as complex industry regulation, and the cost thereof, is restricting new entrants and limiting the reach of incumbents. White financial advisor firms were also actively recruiting black financial advisors as they look towards increased client diversity and potential BEE regulations.

Kevin Hinton, CEO of The Collaborative Exchange says “The quality of young black financial advisers entering the industry as independent financial advisers is impressive. The academy, managed by The Association for Savings and Investments South Africa (ASISA) and funded by its members, is certainly bringing a new financial adviser to the fore. However, this is solving for a microcosm of the need that exists. Most South Africans do not have access to quality independent financial advice. New regulatory and fee commission dispensations, where industry “commissions” have been replaced by “as and when fees”, makes it very challenging for any new person to enter the financial planning industry and survive financially. This means that access to financial advice may be the luxury of the wealthy only, further increasing the divide of unequal wealth distribution in South Africa.”