Yesterday morning, an announcement by Alexander Forbes at their IFA Symposium in Sandton changed the game for independent financial advisors everywhere.
Alexander Forbes announced that they have opened their doors to every single independent financial advisor in the country. The company will acquire IFAs and partner with others in affiliate and associate programs, moving towards an intermediated model, from their traditional B2B model to a new B2B2C (business-to-business-to-consumer) model.
"We've never made such a bold move before"
Independent financial advisors that take them up on it will have access to over 1800 corporate clients to grow their businesses, parity pricing on Alexander Forbes products and Alexander Forbes being able to helps IFA’s with practise management and compliance, according to Anton Kok, Executive: IFA at Alexander Forbes.
I had an exclusive interview with Chief Executive Andrew Darfoor some fifteen minutes after the big announcement to unpack more of what this means.
“As a B2B model we have not been focussed on the individual,” said Darfoor in our meeting. “We’ve now said we want to focus on the individual and make sure they have a plan. So much of clients’ problems come because they got poor financial advice. How do we ensure that doesn’t happen? Independent financial advisors simply do not have the financial resources we do, while we don’t have the distribution network they do.
“We’ve never made such a bold move before,” he went on to say, “and the reason we’re doing this now is we’re confident in our approach.”
It is a big statement on not playing safe by an emblem of what once by nature a safe-playing industry, a concept born out people’s desire for security and stability. But those are no longer the two buzzwords of the day – disruption and digital innovation a closer to the mark. This may or may not just be about Alex Forbes. This may be about us seeing the industry’s risk appetite changing in a fundamental way.
"Alexander Forbes has lost its way"
Having become Alexander Forbes’ group chief executive on 1 September 2016, it’s a bold move too coming from someone “401 days old in Alexander Forbes” as he puts it. But then again, Darfoor is all about bold, as he revealed with his next statement:
“I’ve been in the business a year, at Alexander Forbes. Alexander Forbes has lost it’s way, it hasn’t been a pioneer, where we lead and shape the industry. That restarts today. This is a clear path of shifting that business.
When asked how long this has been in the works, Darfoor did not say, although a separate source estimated ‘most of 2017’, with the initial idea having come long before that.
But will this mean a welcome leg up from the big boys for the little guy? Or will it make IFAs even more of an endangered species? In short, what will this do?
“No, I don’t think that it would endanger the independent financial advisor. We’re not doing this to get IFA clients, we’re doing this simply to reach all our million clients. I think the world is changing, and as a financial advisor you’ve got to deal with compliance, administration, registration and more, which is designed to protect the consumer, then you’ve got to engage with the consumer on the front end – so you’re in a bit of a catch-22, because you want to spend all your time in the front office. So, we’re helping with practise management to help them to grow their business because we’ve got the financial resources. What it does do, from our perspective, is it puts the client right at the centre of our thoughts.”
But what else does this mean? It means that, in terms of competitive advantage, Alexander Forbes has brought the fight to distribution models, where before many insurers were only worrying about price. It may or may not also represent one of the few truly nimble ways to successfully rebrand out of just being ‘employee benefits’ to the average man on the street and into other sectors, simply by allowing independent advisors who meet with the man on the street to access the life, investment, employee benefits and short-term sides of Alexander Forbes, not to mention the R100 billion AUM Alexander Forbes Performer portfolio in particular, if they become an associate.
Another thing that this represents for those who have been worried about regulatory impacts for some time is that this is the sort of move that may effectively turn South Africa into the anti-Australia where RDR is concerned, by bolstering independent advisors so that they don’t become a dying breed thanks to expensive compliance in the face of ever-intensifying regulation.
That is, if they truly do remain independent. This largely put advisors in the ‘multi-tied’ bucket with respect to RDR and success will largely depend on how sincere Alexander Forbes’ support of ‘the little guy’ will appear to be.
Only time will tell on this front but, tellingly, Darfoor said they had already been approached by several IFA’s between his getting off the stage and sitting with me less than half an hour later.
In the meantime, it seems, IFA’s are queuing up to find out for themselves, too.