The South African market is one of the most demanding intermediary jurisdictions. Catherine Turner looks at the pressures in keeping customers happy
In the context of any article about customer servicing, it is important to distinguish exactly whom we mean by the term 'customer'. Clearly, from a regulatory and contractual perspective, a product provider has a direct customer-provider relationship with its investors; however, the wise provider also sees the intermediaries who introduce its business as customers too, and focuses as carefully on this aspect of customer servicing as they do on communications with their ultimate investors. They are right to do so ' without overstating the obvious, the standard of care which a provider gives to its intermediaries reflects both on it and on the intermediary; and an intermediary who is confident of the support he gets will be inclined, in turn, to support that provider in future.
Intermediary customers are a demanding lot; and nowhere more so than in the South African market. One manifestation of this is the hunger for more regular information and performance updates than might be the case in other markets. Perhaps because the country was cut off for so long from the international investment markets, investors and their advisers appear much less sanguine about what is going on with their money all those thousands of miles away. This is even more the case during times of unusual volatility, such as has been seen over the past two years. Consequently, it is not unusual for an adviser to ask for confirmations of their investors' progress on a monthly or more frequent basis. Regardless of a provider's view as to whether this is appropriate in the light of the long-term nature of its product offering, it is important that they be equipped to respond.
As a result, geographically distant product providers aiming for happy South African intermediaries generally need to be geared up to provide web-enabled or e-mailable valuations and it is important not to assume that the former will do in the absence of the latter. Experience in this market shows that many intermediaries are not geared up for web-enabled querying of their investor portfolios. They don't want to have to spend time logging onto the internet, loading pages and going through time-consuming security checks. Rather, they look for regular summary updates, typically in the form of Adobe's Portable Document Format (PDF) files. Often, they ask instead for these to be sent in by e-mail overnight, so as to be there ready and waiting for them in the morning. From a product provider's perspective, the ability to supply automated summary updates on a more regular basis than they might be geared up for in other markets is thus a big help.
A local contact
A further plus is the provision of prompt enquiry resolution. Again the challenge is greater for geographically distant product providers who have little to no physical presence in the country. An ideal first-stop is to provide a South African-based international support desk and a local network of trained consultants, since providers like to feel that there is a local contact point. Equally, however, there are those who prefer to go straight to the horse's mouth with their queries. So a culture of prompt and professional, yet friendly and approachable, support from the overseas office of the provider is key. Providing this service by telephone and/or e-mail within hours that reflect the timezone of the South African adviser, not the convenience of the provider, is a small but essential courtesy.
Another driver for enhanced customer servicing will arise soon, as a result of the changing regulatory environment in South Africa. Independent intermediaries have ' unless they are also managing client assets ' been relatively unsupervised, both in terms of their entry into the marketplace and of how they deal with their investors. This state of affairs will change with the long-awaited enactment of the Financial Advisers' Bill, which will bring into force a licensing regime and impose ongoing regulatory obligations on advisers.
The new regime will bring South Africa into line with the standards that have applied in many other markets for some time and owes much to the UK and Australian regimes. Inter alia, advisers will be under an increased obligation to ensure that they are giving appropriate advice to their investors, and already prescient providers are looking at what they can do to help advisers find their way through the international investment product maze.
In particular, risk-graded product matrices and clearly explained investment objectives are proving highly popular. One approach is to develop a range of relatively simple risk-profiles which attach to the provider's product offerings, but then to ensure that there is a supporting level of detail to explain exactly what these risk profiles mean to the provider ' something which should be regarded as essential, since one adviser's interpretation of the word 'balanced' may not be the same as another's.
The pressures created by the new intermediary regulations are already causing advisers to band together in order to share skills, compliance and product vetting resources and economies of scale. The emergence of a number of South African networks similar to those now commonplace in the UK market is already underway. Many one-man outfits will find it hard to remain in compliance with the various new requirements without employing potentially costly staff to provide them with administrative support. It is entirely reasonable to expect that these networks will also, as they have in other markets, begin exerting their muscle to extract favourable terms for their members from product providers. It seems likely, then, that those providers who have hitherto regarded the market as relatively price-insensitive because of its fragmented nature will need to revise their strategies.
A physical support infrastructure in the country is now regarded by many as a given. South African investors wishing to place their money overseas have some extra hurdles to contend with that don't arise in other markets; specifically, they need to apply for exchange control approval and to gain a confirmation from the taxman that their affairs are up-to-date. This process ' and the subsequent collection, conversion and remittance of funds to the product provider's overseas account ' can be time consuming and costly for a financial adviser and those providers who offer an all-in service, including obtaining all the relevant clearances, have a huge head-start in terms of their perceived levels of servicing support. Some providers, having first-hand experience of the difficulties advisers were having in tackling these administrative issues, offer them free of any administrative charges.
The South African investor has seen several years of significant tax changes which have directly affected both his reporting obligations, and his eventual tax liabilities. Consequently the pressure is on product providers to give help in both these areas and some are now starting to respond. From the reporting angle, intermediaries are ideally given the facility to provide their clients with annual statements of income and (from 1 October 2001) currency- specific CGT reporting. Secondly, from the perspective of minimising liabilities, many providers have developed tax-proofed or tax deferred products which are understandable to their investors.
In light of all these developments, the last but essential element of a successful product provider's support to its South African intermediary customers is regular and visible commitment. High levels of local support need to be supplemented by the regular availability of overseas staff; and this needs to take two forms. Firstly, a good provider builds trusting relationships with its intermediaries through the provision of regular training in its products; intermediaries with a good understanding of the product write more business, and of a better quality, because their confidence and understanding is better. Secondly, a provider who offers managed portfolios and the like should be willing to explain their stance to investors in person. Experience shows that in jittery or difficult markets, the manager who is willing to answer to investors in person is more likely to retain their trust, and therefore their business, than those who are unavailable when the going gets tough.
In summary, the South African market is one of the more demanding intermediary jurisdictions and likely to get more so. However for financial organisations who take high standards of customer care as a given, and who take pains to understand the needs of this unique market, it is highly rewarding.
In the South African market, intermediary customers demand more regular information and performance updates.
The long-awaited enactment of the Financial Advisers' Bill, will bring South Africa in line with other markets.
South African investors wishing to place their money overseas have some extra hurdles to contend with that do not arise in other markets.
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