How Productive are you?

The results of two surveys in the financial services industry were recently published by CoreData, a firm who conducts research in banking, mortgages, retail saving, pensions, asset management and the financial advisory sector.

In January 2014, a report titled Adviser Efficiency – Business Processes in South Africa, provided data on the way we do things here, compared to the rest of the world.

The introduction states that “…South African Independent Financial Advisers, as well as those working in smaller firms, are being forced out of the independent market by the overwhelming demands of new legislation on their time. The pressure to sit exams, increasing administration associated with compliance, and the demands of the Treating Customers Fairly (TCF) initiative may be too much for some advisers.”

The impact of the regulatory examinations is no longer an extra burden for most established advisors, but compliance, particularly for those who elect an in-house option, takes a hefty chunk out of a normal working day. The full impact of TCF is yet to be felt.

Leanne Jackson, who heads the TCF initiative at the FSB, is quoted from an interview with African Insurance Review as saying: “…many firms are not properly estimating the cost of altering their businesses in line with the TCF and will be surprised by the lengths to which they have to go to properly comply. On the other hand, others are almost completely in line with it already.”

Statistically, according to the survey findings, this is how local advisors compare with their international counterparts when it comes to time allocation:

At a guess, how much of a typical working day do you
spend on the following?
average (%)
International average (%)
Meeting with existing clients 21.8 17.2
Managing/communicating with existing clients remotely 20.9 18.4
Managing existing client investments 10.6 14.3
Seeking new clients 6.3 10.6
General administration 12.9 10.7
Regulatory compliance (paperwork and admin relating to industry regulations) 13.0 8.4
Marketing 2.7 3.9
Reading media (e.g. trade magazines, etc.) or using social media 3.6 6.8
Learning about new portfolio construction techniques 5.2 5.8
Other 3.0 3.9

Based on the above, the survey comes to the following conclusions:

  • South African advisers would save a total of 6.8% of their time by reducing administration and compliance work to international averages. This is approximately 30 minutes per day, or 2.5 hours per week of an adviser’s working time.
  • South African advisers are spending roughly 135 hours, or 3.6 weeks, of every year extra on administration and compliance work.
  • If they reduced the time they spend on administration and regulatory compliance work and redistributed it among other business activities, advisers could spend an extra 26 hours, or 3.5 working days, on activities such as learning about portfolio construction or engaging with the media.
  • If only general administration work were brought down in line with international averages, this would save 2.2% of an adviser’s time overall, amounting to 10 minutes a day, just under an hour per week, or 43.6 hours (six days) a year.
  • Advisers could then spend 22.4% of their time meeting with and cementing existing client relationships, and 44.0% of their time meeting, managing, or communicating with clients in person or remotely (an increase of around 25 hours over the year).

There are always two sides to every story – the statistical and the practical. The following lament from an advisor regarding servicing clients illustrates the point:

The real cost of servicing never features when it comes to remuneration reviews. A product provider recently required that I get an updated broker’s note from a client to obtain blank forms from the provider!

The client wanted to make an old policy, sold by its agent, paid-up. If I agreed to that, then I would be liable under FAIS for inappropriate advice. I saved this policy for the product provider by removing the premium update facility, which was sound advice. The admin cost to save the policy and remove the update facility, however, was for my account. It took, via call centre interaction, 4 emails to the product provider and 2 client visits to finalise this. There is no help or remuneration from the product provider for servicing. This is the reality of product provider TCF.

Can you imagine if I tried to charge a couple of hours for this so called simple service, which so often escalates into time consuming administration?

I have another case with a product provider whose maladministration resulted in 9 on-site visits. Apart from the time costs as a result of poor product provider service, I was forced to placate the client by reducing my fee to 0,25%, yet still have to carry this enormous administrative burden.

In this case, the migration from an old to a new platform has cost me over 3 months, 30 hours and 50% of my future income.

This was all done as I convinced the client against switching providers as there would be a penalty. If I had just switched out, it would have been more profitable for me and saved me countless admin hours, but would have been contrary to my TCF and FAIS code of conduct obligations.

I wonder how few people realise that the regulations have locked us in as free servicing staff for product providers?

Hopefully this issue will be addressed in the Retail Distribution Review where the various types of intermediary and advisory services will undergo fierce scrutiny.

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