Secondary

Old Mutual Wealth Initiatives cause stir

Two media articles on the new Old Mutual Wealth business model, published on Wednesday, will certainly cause more than just a stir in the industry.

As usual, the mention that commission would no longer be charged, stole the limelight. There are several other positive initiatives

Moneyweb mentioned a few other salient aspects which indicate that the approach from Old Mutual Wealth (OM Wealth) is definitely taking the future, as envisaged by the authorities, into account. These include:

  • Intermediaries should represent clients, not product providers
  • Commission should be replaced with fees
  • Risk profiling is not enough to determine a client’s ultimate objective, and how to get there

“People want their advisor to add value,” Andrew Bradley, CEO of Old Mutual Wealth told Moneyweb in an interview on Tuesday. In the past, advisors provided information on products and access to them. Currently, clients can get this information and access without the help of an advisor and thus the role of the advisor also has to change.

Bradley believes advisors and the financial services companies play an important role. “They need to be paid and paid appropriately, but the way commissions were structured in the past could lead to inappropriate behaviour and outcomes.”

The last sentence virtually echoes the FSB’s thinking in the latest document on envisaged changes to intermediary remuneration.

According to Sake24, a minimum administration fee of R100 will be levied. Additional fees will be determined by the client’s needs in terms of the quality and type of advice required.

The article also states that commission on existing products will continue to be paid until it is terminated, or converted to the new platform. From the article, it appears that OM Wealth currently services about 220 000 clients who will be given the option to elect whether to retain their current products, or change to the new options.

Advice previously focused on risk profiling, and whether you as an investor elected to be aggressive or conservative. We do not think it is appropriate any more, and would rather help our clients to determine how they should invest and budget to be able to retire with a specific amount of money. (My translation)

Independent advisors will receive free training, but will need to pay a fee to use the platforms and modelling systems.

While the “sweet spot” for Old Mutual Wealth in terms of the clients catered for are those who have R5m in investible assets, Bradley stated that it is not excluding clients who have less than that.

This is the most sought after section of the market, and it will be interesting to see how other providers react to this initiative.

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