This, he says, is often because these firms already have a substantial level of assets under management, and therefore do not think they need to join an IFA association.
“Either these product provider firms are not prepared to give back to the IFA industry, they believe the corporates they rely on will help them so why bother with a dedicated IFA association, they do not believe they will get any value from joining an IFA association, or they are caught in the lights of the train in the tunnel and do not know what to do.”
Smorenburg says investment-orientated advisers with R100m in assets under management will find it easier to embrace RDR, while one-man bands will struggle to survive.
United front
In September, SAIFAA launched its offering as ‘the voice of the IFA in SA’ and Smorenburg says many industry players are speaking up about the challenge of moving towards a fee-based practice. However, some companies are not yet entirely committed to the association’s objectives.
The SAIFAA chairman points to the product provider list and suggests this illustrates that some corporates have their own tied agency structures and sit on the fence when it comes to independent financial advisers.
“The biggest providers are Old Mutual Life, Sanlam Life, Liberty Life, Momentum Life and Discovery Life, and they probably have the champagne on ice waiting for RDR to drive independents to their embraces,” he says. “Those without their own tied forces are waiting to see what happens and still have to formulate a specific strategy.”
While many have given their support for the principle of having a dedicated independent financial adviser association, “only time will tell whether they come to the party”.
Cost implications
When it comes to platforms, Smorenburg believes many South African IFAs are advanced in using client record management systems and various other platforms.
“There has already been a great emphasis on platforms, but of greater importance to the client is greater emphasis on total cost,” he says. “No matter what platforms or structures you use, the industry is being pushed by the regulator to make sure the client understands what the total expense ratios are.
“It is important that clients know who they are dealing with and what their total expenses are; they need to know how much they are paying.”
When it comes to the implementation of the RDR in South Africa, it is not yet certain which direction many of the thousands of IFA firms will take. Some firms, perhaps, will be subjected to the ‘divide and rule’ approach, whereas others clearly see the value in SAIFAA’s ambition to empower independents through unity.
