Expectation was the thread running through the 2016 International Investment Forum South Africa events hosted in Johannesburg and Cape Town by International Adviser.
Not only was expectation key to the sponsor presentations, which ran the gamut from exploiting flawed earnings expectations within global equities to clients’ views of underfunded retirement, but it was also the recurring theme in both panel discussions.
In the first instance, the expectations were those of clients, especially in relation to risk and return.
As Galileo Capital chief executive officer Theo Vorster told delegates in Johannesburg, if you are making money for your clients, conversations are always easier to have.
“If I am playing Russian roulette, then five times out of six I am going to look like I am great at risk management,” he said.
But the hard part, he added, is ensuring clients understand the risks they face – a job made more difficult by the low-growth world in which advisers now operate.
Verso Wealth managing director Wessel Oosthuizen made a similar point in Cape Town, citing the example of a client who cannot afford to retire on the return offered at the level of risk he is willing to take.
“It is not a nice or easy conversation to have with a client, especially an older one, but you have to be honest and disclose the reality of the situation,” he said.
It is not only the investment environment that has changed, however, as the landscape in which the adviser operates has also changed dramatically, both in terms of the client and the regulations that define the adviser/client relationship.
Derek Smorenburg, chair of the South African Independent Financial Advisers Association (SAIFAA), explored these changes at both debates.
“The client of the future is going to demand a number of things from his or her adviser. First of all, what are your qualifications? Qualification is going to become an important paradigm shift for many of you.
“The second aspect clients are going to be looking at is whether or not you are indeed independent, because a tied agent in the post-retail distribution review world can only promote the products and services of their employer. Independence is going to become vitally important,” he said.
He added that increasingly advisers should be expecting questions from clients such as: “What are your fees and why am I paying them? What value-add are you giving me and what are my total expense ratios? What is it costing me for this process?”
The final change advisers should expect, said Smorenburg, is a greater willingness among clients to use technology.
Oosthuizen agreed: “We need to segment our clients not only according to their value but also in terms of their technological know-how. How you communicate with a client and ensure they are comfortable with that communication is becoming ever more important. If you send emails to somebody who wants a telephone call, for example, it is just not good business.”
Carrick Wealth group sales director Mike Potts said that in his firm’s experience, a lot of clients are now demanding 24-hour access to client valuations.
“Clients are crying out for more technical interaction with their advisers, but while many are keen to see their adviser more often than four times a year, some are happy to see them once a year and to be able to log in online. The relationship is changing. It depends what the client is comfortable with.”
That said, Potts added that most of Carrick’s clients remain uncomfortable with the thought of getting advice online.