The Financial Sector Conduct Authority (FSCA) has said it is in close contact with industry to “ensure that markets continue to work well, and there are minimal disruptions to customers during the covid-19 disaster period”.
As it works to understand the “likely impact” on customers, the FSCA’s primary focus remains ensuring that “financial institutions treat their customers fairly and minimise any adverse customer outcomes during this difficult and uncertain period”, it said on 19 March.
The FSCA urged customers to remain calm, stating it has “engaged with financial services entities to ensure that […] all investments remain safe, albeit volatile”.
“Customers are advised not to panic and withdraw funds without advice.
“We encourage customers to utilise available digital platforms, where possible, and be on high alert for any fraudulent scams and investment offers that sound too good to be true,” it added.
“We expect all financial services entities to be looking at their business contingency plans during this time and assist customers in accessing their financial products and services,” the regulator added.
But what does this mean in practice, when firms are on lockdown and advisers told to work from home, as they have been instructed to for 21 days from midnight on 26 March?
To get some insight, International Adviser spoke with several businesses operating across the market.
Long road back
In the 12 years she has been in South Africa, Carrick Wealth director Samantha Bowen has “never had so many clients eager to take their money overseas”.
“When taking into consideration inflation, tax and the ever-depreciating rand; their local investments are going backwards and the buying power of their money is actually rotting away.”
But what Bowen has found particularly interesting about her clients is “they are now much more understanding that now is the time to invest”.
“The SA economy, market and rand are in tail spin. The reserve bank cutting the repo rate by 100 basis points has definitely helped, but the road ahead is going to be a long one.”
Her clients are aware that “we probably haven’t seen the worst”, but with the S&P and FTSE being as low as they are, “they know, over the long term, it will recover”.
“As we only assist clients with their long-term financial planning, they are keen to get into the market and wait it out.”
As part of its arms’ length contact with clients, Carrick has also been offering webinars to help them stay on course during these unprecedented times.
Talking helps
Rex Cowley, co-founder of Overseas Trust and Pension, told IA that the firm has seen “very little concern” from clients, which he attributes to the “conversations they are having with the financial adviser managing their funds”.
“The value of pension assets have fallen, albeit not to the same extent as equity markets on account of diversification.”
Dealing activity across portfolios has risen significantly, however, as advisers adjust positions.
Cowley added that OTAP has “full contingencies in place”, crediting the technology the firm uses as helping to make the change seamless.
Tech to the rescue?
With social distancing now de rigueur across the globe, the obvious solution is technology – as recommended by the FSCA.
South Africa is “the most connected country on the African continent” following the arrival of high -speed internet cables in the late 2000s, according to Switzerland’s International Telecommunication Union.
Just a day after this article is published, South Africa will enter a three-week lockdown, effective from midnight on 26 March until 16 April.
So, whereas technology could help advisers engage with clients in rural areas in the past, it will now be essential to help those in the immediate vicinity.
“In volatile times like this, the robustness of risk profiling in really being tested to its limit – so transparency and communication is key,” Mark Sanderson, chief operating officer at Praemium, told IA.
“South Africa has made massive strides in dealing with fraud and corruption, but is still ranked 70th in the world in the Corruptions Perceptions Index, so anything that can be done to make transactions more secure and build confidence with investors is welcome,” he added.
“Investors can digitally accept documents from statements of advice to suitability letters. Critically, digital acceptance collects a vast array of telemetry, which can be used to authenticate the legitimacy of the transaction.”
But technology can be an important tool throughout the entire client/adviser relationship – beyond the initial meeting and onboarding process.
“Investors and advisers can access their portfolio information 24/7 from any device, anywhere. Praemium provides portfolio analytics and reporting – not just on our own platform but from over 100 other financial services companies, globally.
“We have spent the last 12 months building integrations with the major South African financial institutions, so that investors and their advisers have access to a single source of trust for all of their financial information,” Sanderson said.
Expanding the toolkit
Having technology sit at the heart of a business from day one gives it an advantage, as staff and clients are used to interacting remotely.
“As well as accepting all our investment instructions digitally, all our staff are able to work from home,” Caroline Naylor-Renn, chief operations officer at Inn8, told IA.
“As an online platform, our business has been able to operate as normal this week, despite the precautions that have been put in place.”
While clients are undoubtedly a priority for advice firms around the world, staff are also massively important.
“As a business, we are ensuring that we do daily communication to our staff, to ensure they are well informed and feel supported during this time of uncertainty.
“Our chief executive Mickey Gambale did a video conference to all staff on Friday and we did a live Q&A session where they could ask any question that was worrying them.
Naylor-Renn said it went “fantastically well” and the team is planning to do more sessions in future.
“We are used to using collaboration tools like Zoom, Teams and Slack and these really help us to stay connected and support our culture, even if we are not in the same office any more.”
“We use them so often that we are also helping our advisers to incorporate these tools into their business models to allow them to work remotely with their clients too.
“The future is entirely digital but with a connect human experience,” she said. “And these tools allow us to achieve that.”
With such market turbulence, on top of an already struggling South African economy, many clients are relying even more on their advisers at the moment, Naylor-Renn added.
“It is times like these when the value of good financial planning advice is really seen.”
