Where to for intermediaries in 2023?
Where are the opportunities for growth in 2023, for intermediaries, and what challenges will present themselves this year?
FAnews spoke to Anton Swanepoel, CFP® and Founder of Trusted Advisors, Kurt Stanley (FIISA), Director of District Seven Risk Services, in partnership with SFP and Ryan McCaughey, CFP® and FPI 2021 Financial Planner of The Year about the year ahead.
Obstacles, growth and profitability
South Africa’s advisers and intermediaries, according to Swanepoel, have certainly had more than their fair share of obstacles over the last few years, and COVID-19 simply took it to another level.
“It certainly disrupted operations, but in my view, product suppliers and financial services providers have responded remarkably well, by moving to online platforms. Meeting online and concluding transactions electronically are probably some of the greatest gifts that businesses received in the midst of what could have been catastrophic, and even more, devastating. I don’t believe that we have seen the end of the ripple effects of COVID-19, and I believe that advisers and intermediaries will continue to experience obstacles. However, regardless of the obstacles, there are definitely opportunities for growth and profitability. Increased profitability will be particularly challenging, given the additional burden of regulatory requirements that are on their way over the next few months,” he said.
McCaughey added that given the fast-paced world we live in, and the forever changing financial planning landscape, it will be important for financial planning practices to focus on the knowns.
“The unknowns are hard to predict in this volatile period and often distract financial planners from what they are good at – and that’s helping clients engage in financial behaviour change! The obstacles they could face can be anything - from operating and compliance costs to geopolitics - most factors we can’t control, however, what makes a good financial planner is their ability to structure and overcome those obstacles. Profitability and growth go hand in hand – if planners focus on their business processes and building mutually beneficial relationships, the rest will come,” he said.
If anything, Stanley said COVID-19 re-emphasised the value of person-to-person engagement, typified by the professional intermediary, and places the broker at the forefront of key client engagement.
On intermediaries’ radar in 2023
What should be on intermediaries’ radar in 2023? Swanepoel said he would rank them in the following order: “firstly, take good care of your existing clients. Try to improve your client service experience. The value of ongoing client communication and reviews goes far beyond compliance. It will serve you well to remember that your client is always somebody else’s prospect. Secondly, you must make every effort to understand how the next wave of market conduct legislation will impact your business. And lastly, start planning towards your move from the Financial Advisory and Intermediary Services (FAIS) Act to the Conduct of Financial Institutions (COFI) Bill. Don’t wait too long. There are enough fundamental principles that are laid down in the Financial Sector Regulation (FSR) Act and the COFI Bill to prepare the foundation for the migration from FAIS to COFI.”
McCaughey added that scaling up your financial planning practice through the use of technology will be vital. “Everything from Customer Relationship Management (CRM), Financial Needs Analysis tools, Assets under management (AUM) reporting, commissions reporting, and client reports will be useful. Ultimately, making use of technology will allow you, as the financial planner, to focus on the true components of financial advice, thereby freeing you up to connect with your clients building long term relationships.”
Stanley emphasised that the typical broker can no longer rely purely on premium and placement capability to create value. “There is a greater demand in the industry for advice and insight into risk management. The ability of the modern broker to assist the client with risk identification and risk evaluation to assist the client in better managing their risks will become significant to clients who ordinarily would not have placed emphasis on the strategic benefit of this skillset. COVID-19 was key to clients’ appreciation of risk management, given how unforeseen the implications of the event were for many businesses.”
The biggest differentiator in 2023
“With the insurance market hardening, following the detrimental financial impact of COVID-19, the KZN floods and other significant events have had on re-insurance treaties and insurer appetite, the ability of the broker to skillfully package risks to present to the insurance market will be of significant benefit to high-risk industries. This, coupled with sound market-relationships will be key to brokers helping clients navigate the uncertain period ahead,” said Stanley.
Swanepoel thinks what the famous Peter F. Drucker said decades ago about marketing and innovation being the primary differentiators still holds true to this day. “Marketing - communicating your value proposition and making sure that your client’s valued experience is second to none, and innovation – innovative ways to communicate with clients and the optimal use of technology to be more effective and efficient will continue to differentiate FSPs.”
The biggest differentiator, McCaughey believes, is having a rigorous ongoing management and review process of your clients financial planning affairs. “As a financial planner, it will be important to establish/reinforce clear communication channels and feedback sessions with both your clients and service providers. The financial planning environment can be particularly complex and is forever changing. Staying up to date will allow you to put your best foot forward when servicing your clients,” he said.
Issues that could impact business in 2023
Stanley believes the re-insurance market and its effect on local appetite will pose a major challenge to risk placement. “Certain product segments, which were traditionally low-risk offerings, have changed in their complexity and cost. Overall, the strategic response by insurers to happenings in the past 2-3 years will be key: as we have already seen major players shift from their willingness to take on new business to grab market-share, to the polar opposite response by calling for dramatic premium increases or else coming off-risk in many cases.”
Swanepoel said, “from a market point of view, the economy will have a massive impact. From a regulatory point of view, I believe legislation like COFI will have the most significant impact on business. From an internal point of view, the single most important issue that will impact any FSP is leadership or the lack thereof. The difference between two equally gifted intermediaries is leadership.”
Pivot to thrive
“I believe resilience on the part of brokers will be key – the current market conditions, coupled with more stringent legislation places the broker in a more dynamic and demanding environment than ever before. This will require gearing practices to meet with the demands head-on, but also the intellectual, emotional, and professional strength to persevere and ride out the challenging cycle, which will likely be here for at least a few more years,” said Stanley.
“Don’t clutter your mind with things you cannot control. Focusing on what you can control and keep on doing the best you can,” advised Swanepoel.
McCaughey added that an important trait for a financial planner would be to truly be themselves. “Some aspect of your life story will resonate with your client and/or colleagues. This common ground is so powerful when establishing a lasting relationship with your clients. You want to create an environment where your client becomes part of ‘your’ family from generation to generation, incorporating their personal, business and trust affairs where applicable.”
A final word
“Managing a financial planning practice and client expectations is all about your ability to adapt to new circumstances. If 2021 and 2022 are anything to go by, this is most likely your biggest character trait that has been challenged. As you experience the ups-and-downs, it is up to you to make the decision as to how you want them to ‘sharpen’ your life skills, in the end making you a more resilient and competent person. The same goes for managing your financial planning practice. What makes a good long-term financial planner is the ability to structure and commit to a sound financial planning process, while at the same time, holding that plan loosely enough to adjust along the way. Trusting a sound process will ultimately aid you in building a successful financial planning practice,” concluded McCaughey.
Despite the obvious challenges, Stanley said opportunities continue to present themselves and it is important to always be mindful to remain focused on adding value, being consistent in your value-proposition to your client and taking advantage of every opportunity which arises.
In his concluding remarks Swanepoel said, “In my 32+ years in the industry, it has never been more challenging. I admire every adviser and intermediary who has managed to survive the perfect storm that we have experienced. Be safe and stay strong!”
Writer’s thoughts
In all of the change and challenges presented, the role of the intermediary will become even more important as the insurance risk landscape evolves. They are the essential players in the insurance value chain, making material contributions across multiple channels and functions. And, although there are still so many unknowns, intermediaries have adapted well to the changes. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.
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