South Africa Needs More Financial Advisers
There is a big need for more financial advisers in South Africa, especially to help address the serious lack of retirement savings experienced by many South African retirees.
Georgina Smith, Head of Distribution at INN8 Investment Platform, recently led a discussion at the ABSIP Retail Investors Symposium on the role that Linked Investment Service Providers (LISPs) can play in financial education and inclusion. “It is a big problem in South Africa; people just don’t have enough to retire. But this also creates an opportunity for investment platforms to step in and create innovative solutions to help people save better,” she said.
Smith highlighted the concerning findings of a report, released earlier this year by Genesis Analytics and the Financial Sector Conduct Authority (FSCA), proving the extent of under-saving for retirement among South Africans. These findings include that only 12% of the 3.6 million South Africans in the retirement age group received a form of income in 2020 and that more than 90% of the country’s retirees are unable to maintain the same standard of living they enjoyed while working.
Earl van Zyl, Director & Head of Product Development at Allan Gray, pointed out that while South Africans are not adequately saving for retirement, they are saving in other ways. “South Africa has about 11 million people who are saving through stokvels, but only 3 million people saving through retail investment platforms. Perhaps we should think about ways to make stokvels a regulated product, so platforms can enable people using social savings mechanisms like stokvels to invest, instead of simply for saving to fund consumption.”
Sangeeth Sewnath, Deputy Managing Director at NinetyOne, argued that enforcing compulsory saving for retirement is critical to ensuring that people start saving early enough. He added that investment platforms can also play an important role by reducing the cost of saving and investment. “Investment platforms are built for inclusion as they generally charge in basis points and rarely charge a minimum fee. This means that platforms enable funding between large and small investments.”
However, Sewnath says the most effective way for investment platforms to foster financial inclusion is not by reducing costs or fees, but by lowering the minimum amounts needed to start investing. “We have to use technology to build platforms that can reduce the minimum [investment needed] to enter the market. That is going to create accessibility. Then, must do financial education, and here there is still a big need to increase the number of financial advisers in the market.”
Khanyi Nzukuma, Chief Executive Officer at Glacier by Sanlam, agreed that there is still an important role for advice in the South African retail investment space. He highlighted the need to use different approaches to costing advice, depending on the needs of clients. “There are people willing to pay for advice and then there are people for whom we should try to make access much more affordable.”
Nkuzuma added that financial education should include aspects like educating people about risk appetites and responding to their worries about the fluctuation on the value of their capital, again highlighting the important role of financial advisers.