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Keeping Future Fit

FundForum’s global think-tank focuses on the client

It’s no secret that Sanlam Investments (SI) is on a client-centricity drive and that we switched from a product to a solution mindset quite a few years ago. To create world-class solutions we pay attention to what clients need most and keep track of what is being offered globally.

To stay in touch with these trends, CEO Johan van der Merwe, Cora Fernandez, CE of Institutional Business, and Kay Lala-Sides, Head of Strategic Integration, attended FundForum International 2015 in Monaco earlier this year.

‘We don’t go every year, but this year’s client-centricity theme resonated with us as a business,’ Kay says. ‘FundForum International is the world’s largest event for fund managers and global distribution partners with over 1 200 attendees.’

Product development takes a back seat
At the conference, speakers shared research that highlighted how investors are becoming increasingly aware that investment products are very different from cars and computers. For example, investment products do not have a definable shelf life or replicable outcomes. Actual returns can vary markedly from expected returns and investors are realising that putting blind faith in past performance numbers may also mean investing in products that cost too much and deliver too little.

That’s why asset managers are shifting their focus away from product innovation towards identifying, understanding and delivering on clients’ specific needs, including those of which clients are not even aware. The trend points towards solution innovation rather than product innovation.

In a study by Create Research, for example, 58% of the respondents cited the switch from products to solutions as the most important driver of innovation over the next three years.

Three stand-out themes
Aligned with the client-centricity theme at FundForum International 2015, speakers identified a number of enablers and three stood out:

  1. Fintech
  2. Partnership
  3. Investor education.

Client enabler
#1: Fintech

Disruptors such as Uber, Airbnb, Betterment and Bitcoin were mentioned by speakers. It’s clear that technology is creating a wave that will change the shape of our industry. Already low-cost online ‘advice’ platforms, such as Betterment, Nutmeg, Wealth Horizon, Money Farm and Nordnet, are offering simple tools that help individual investors make asset allocation decisions. Worth noting is that for two of the platforms discussed, the average age of users are 47 and 48 respectively, showing that these ‘robo-advisers’ are not being used by millennials only.

Although these platforms are putting pressure on the adviser end of the value chain, we at SI believe there will always be a place for quality professional advice.

On the other end of the of the value chain, crowd-funding platforms are connecting investors/funders with borrowers, providing investors with the opportunity to invest in assets not normally available to retail investors. Retail clients are quickly becoming accustomed to receiving products and solutions at wholesale prices, putting the margins of financial service providers under pressure.

Client enabler
#2: Partnership

The financial services ecosystem has a number of stakeholders who are interdependent on one another. But the world within which we’re operating is now being disrupted by crowd influencers, opportunities to invest in assets not normally available to retail investors, a ‘non-consumption’ mindset where big ‘blockbuster’ brands are not the only attraction for investors, and competitors are coming from all sectors, not only financial services.
We believe this creates plenty of opportunity for redefining and strengthening partnerships across our value chain as well as the types of solutions we can offer.

Client enabler
#3: Investor education

Because so many investors have been following past performance blindly to such extremes that the bulk of global flows goes into top star funds, the industry has unsurprisingly developed a blockbuster culture, focused on past performance, which is not replicable and cannot form the basis of client decisions. It’s crucial that investors receive better guidance on the implications of their investment and saving decisions throughout their lifetime.

Where is SI in terms of these trends?
Over the past two years the SI cluster has successfully shifted its strategy and approach from products to solutions and client outcomes. Our Retail business delivered this through its implemented consulting solutions to Sanlam Financial Advisers and independent financial adviser (IFA) market segments.

Our Institutional business is following suit with similar solutions aimed at the ‘mid-market’ retirement funds. The latest examples of solutions include liability-driven investing in the defined-benefit segment, lifestyle investing in the defined-contribution segment and advice-embedded investing in the mass market.

In terms of fintech, ‘robo-adviser’ solutions are being explored, not as an alternative to using a real adviser but as an auxiliary channel for clients with small investment amounts and simple needs who prefer to invest online.

We see significant opportunity in the fallout from new regulation and have developed leading solutions to help our wide range of clients meet their fiduciary requirements and fulfil the needs of the end client or retirement fund member.

For example, within one of our businesses we’ve developed a solution to bridge the gap between retirement funds (our institutional clients) and the traditional retail advice sector. It provides the much-needed ‘best of both worlds’ to members with regard to the governance, expertise and wholesale cost structure of a retirement fund, together with individual financial planning and advice.

Globally, one of the most noteworthy shifts is the one towards the client. ‘This shift has shaped how we think about what we offer our clients and is also reshaping our industry,’ Johan says. ‘I am confident that the strategies being pursued across the Investments cluster strongly position us to take advantage of this shift.

‘Importantly, the shifts are also aligned with our core purpose, which is to improve the lives of a broad range of stakeholders. To my mind this is a powerful combination and will enable Sanlam to be a sustainably future-fit organisation.’

To create world-class solutions we pay attention to what clients need most and keep track of what is being offered globally.

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