“IFAs have a simple message for linked investment service providers and other asset management companies: make our lives easier,” said Insight Discovery’s chief executive Nigel Sillitoe.
“That includes providing information, through seminars and other channels, on the outlook for markets, the use of social media to build the IFAs’ businesses and the selection of funds.
Coming challenges
Insight Discovery’s South African Investment Panorama (Saip) report identified a number of changes that will take place in the coming year as IFAs look to boost process efficiency and deliver better outcomes for clients.
"Many IFAs consider that the industry will be strengthened over the long term by the RDR, as it requires further improvements in professional standards."
“As was the case last year, the general business environment is tough for many IFAs. It is still not entirely clear what will be the impact of the forthcoming retail distribution review (RDR) regime. Pressures on prices remain in a downwards direction,” Sillitoe said.
Some of these changes include increased usage of discretionary investment management (DIM) services and boosting their usage of offshore funds.
“Clients are becoming more informed, more sophisticated and more demanding. It is of little surprise that the fund selection process is one of the most important factors voted by advisers, when dealing with asset managers,” says Jack Lin, head of Asia Pacific, Middle East & Africa at Pioneer Investments.
“Fund selection in South Africa is not overwhelmingly based on investment performance. Besides performance, IFAs base their decision on a combination of factors such as fees, independent fund ratings, investment process and company reputation.”
Technology and change
The survey of 255 IFAs also found that the evolution of technology is a key part of the drive towards greater efficiency. Some 85% of IFAs see new technology and processes as an opportunity in the coming year or so.
However, 15% view technology as a threat. This may be because new technology makes it easier for potential clients to access information about investments, a factor which is regarded as an opportunity by 89% of IFAs – and by a greater number of senior IFAs.
About 59% of IFAs see pressures on advice fees as a challenge for the coming year, while the remainder are optimistic. Senior IFAs are less concerned about fee pressures than are other IFAs.
Additionally, almost all IFAs think that the Financial Services Board should do more to monitor unregulated schemes that are offered to investors in South Africa.
Rise to the challenge
Insight Discovery’s first Saip report, in mid-2015, suggested that most IFAs would rise to the challenges posed by RDR, and that many would flourish.
Sillitoe said: “Events over the last 12 months have vindicated our confidence. Looking forward, many IFAs consider that the industry will be strengthened over the long term by the RDR, as it requires further improvements in professional standards. Our research found that senior IFAs are particularly upbeat.”
