You can divide financial advisers into agents of financial product providers, such as Old Mutual, Discovery and Sanlam, and independent financial advisers. Although independent advisers cannot draw on corporate expertise and do not receive the administrative and legal support that the big finance houses offer their agents, they are in a better position to survey the product market critically, provide you with a wider choice of products, and take immediate advantage of new developments, including offerings by market disruptors.
Until now, these independents, who number about 5 000 in South Africa, according to financial services industry veteran Derek Smorenburg, have not had an organisation that specifically looks after their interests, although there are industry bodies that provide support and education for advisers generally.
This is set to change in August, with the launch of the South African Independent Financial Advisors Association (SAIFAA).
Smorenburg, who is driving the initiative, says that although independent advisers in theory have a wide range of financial products at their fingertips and can thus be more objective in advising on products than so-called “tied agents”, in practice many of them know and sell the products of only a handful of providers. In addition, he says, while most advisers are typically strong in building and maintaining relationships with their clients, many of the advisers he has worked with are poor at running their businesses and need to consider practice management efficiency programmes.
SAIFAA aims to provide its independent adviser members with the type of support that the agents of the big finance houses enjoy. Among the benefits SAIFAA will offer its members are information about and access to the products of more than 20 providers, forums exploring industry trends, practice skills development, workshops on health and lifestyle trends among consumers, and a due diligence tool, which will enable advisers to probe the soundness of products they are considering offering their clients.
Although the Financial Services Board requires a minimum standard for registration as a financial services provider, financial advisers, whether independent or “tied”, vary widely in their qualification levels and professionalism. Those who are best qualified to serve you hold the Certified Financial Planner accreditation and belong to the Financial Planning Institute (FPI).
As with the FPI, a prime aim of SAIFAA is to raise the level of professionalism in the industry. And in an agreement with the FPI, FPI members will receive a substantial discount on their SAIFAA membership, and will earn continuing professional development points for attending forums and member-only value-added workshops.
Wouter Fourie, the managing director of Ascor Independent Wealth Managers in Pretoria and a prominent member of the FPI, when asked whether he believed such an organisation would benefit independent advisers, said: “The answer is yes, yes and yes. In an industry overwhelmingly dominated by insurance companies and asset managers, the independent adviser’s voice has been absent, maybe even smothered, distorted and even ignored. [The association] will give independent advisers a voice with a mandate to represent the community with the regulator and the media.”
Fourie says consumers will benefit, in turn, because a more strongly organised and focused independent adviser community will “keep the industry healthy by challenging the product providers and regulators to put the client first in all aspects”.
He says it will also create the opportunity for independent advisers to share knowledge, resources and experience, and raise the expertise and service delivery of the independent adviser community.
“Remember that independent advisers can consider all types of investment products that could meet your needs and are able to give you unbiased and unrestricted advice. A tied agent, on the other hand, has to fit a client’s requirements into the available (restricted) range of products and solutions they have available from the company they work for.
“The best analogy in this regard is tailoring. Independent advisers can create and manage bespoke solutions for their client, the equivalent of a tailor-made fit; a tied agent must offer an ‘off-the-peg’ solution, even if it is not a perfect fit,” Fourie says.
SAIFAA’s opening forum in August focuses on a serious issue affecting retirees: the risk of outliving their living annuities.
Smorenburg estimates there are half-a-million living-annuity holders and their spouses, who have about R380 billion invested in these products. A large proportion of these, he says, “will run out of their investment capital long before the last-dying survivor”.
It is here that SAIFAA members will come into their own, Smorenburg says. With a broad range of products, including hybrid annuities, at their disposal, they will be in an excellent position to help annuitants in this predicament.