Monday, January 24

Alexander Forbes will see a 40% increase in customers thanks to the Sanlam acquisition


FIFI PETERS: Alexander Forbes today announced two major transactions with Sanlam, in addition to reporting its interim financial results. The country’s largest pension fund manager reported a 20% increase in assets under management to R423 billion in the six months through September. This was helped by an increase in new business during the period.

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We have the CEO, Dawie de Villiers, on Market Update to review the numbers and offerings. Dawie, maybe we’ll start there, with the transactions you announced today with Sanlam. You are buying your independent retirement business and you are selling your clients’ management business to them. Tell us exactly what is happening here and what is the end of these agreements.

DAWIE DE VILLIERS: Thanks for the opportunity, Fifi. First of all, we are very excited about the opportunities that have led us to these transactions, which are 100% aligned with our strategy and with what we hope to execute from the beginning of the journey.

We are buying the large independent management business of Sanlam, which will have some 350,000 members under management. That allows us, in our core ability to do this retirement management, have the scale to build capabilities and really get the synergies over time from that business. That allows us to have great growth opportunities there.

The other part of our business is where we basically advise the members of these funds; that’s our retail consulting business, our retail consulting business. Obviously now we have the opportunity to speak with more members, which is the first point. But where we have fallen behind is a management platform to allow these members to transact with us and communicate with us, and our platform was quite old. So partnering with Glacier and putting members on that platform helps us a lot. They are a world-class platform and now, to work with intermediaries, our intermediaries and our clients will immediately see a massive improvement in their service. That will help us to do much better in terms of getting those members and getting the assets from them over time.

FIFI PETERS: The addition of the 300,000 or 340,000 or more members of Sanlam – what does that add to your total membership base?

DAWIE DE VILLIERS: That adds about 40% to our active members under management. It will take us above the 1.2 million members that we will have under management at that time.

FIFI PETERS: And are these transactions a done deal or are there still some regulatory hurdles to go through?

DAWIE DE VILLIERS: We still need to get all the regulatory approvals: the Competition Commission and the other approvals. Once we get it, we will have the effective date and then we will begin the transition.

FIFI PETERS: I imagine you are not expecting any obstacles.

DAWIE DE VILLIERS: We have worked a lot. It is a complex transaction. It involves a lot of people, clients, staff. So we made sure of all the angles and hopefully we did our homework well enough that it went through all the approvals.

FIFI PETERS: Dawie, just going to the numbers you reported today, the period under review included the third wave and also the severe lockdowns at Level 4. Can you tell us a bit about how companies responded under this particular wave in terms of contributions? Did you see them cope with the pensions of some of their employees compared to September 2020?

DAWIE DE VILLIERS: It has been very different from the first period, the first two waves, where we saw a severe effect on companies: a lot of entrenchments, people asking for lower contributions, while I think most of it is out of the system now. There are very few downsizing at this time. We have seen normal levels for the last two to three months, as we saw before Covid, and we see normal contributions from these members who are also in the funds.

In some sectors, such as finance, people have positive employment figures. Obviously in affected areas like entertainment the numbers are not increasing yet, but we don’t see much more reductions happening and hopefully that indicates that it is part of the change.

FIFI PETERS: What we also saw was a lot of people collecting their pensions during this period when they lost their jobs, adding to the long-term challenge of having people with enough savings. I know that at this moment the industry is talking about the best way to advance in improving the culture of savings. Quite a few regulations are proposed on the table. Tell us about that and maybe your opinion as Alex Forbes on how to achieve a proper savings culture in South Africa.

DAWIE DE VILLIERS: We saw the unfortunate circumstance where people had to live off their pension money when they were laid off, and that is money outside the system and it will obviously be a burden on the state in the future if those people don’t get new jobs. In fact, their pension money has been decimated because they had to live on it. That was very unfortunate. What we think, looking forward, with a lot of work that the Treasury and all savings entities are doing, is to increase preservation. But we find that people need money when unforeseen circumstances happen, like when they lose their job, or there is a divorce or something like that.

So we want to create a system where there is an element that is definitely kept to the end, so that people have something for the end. We have to make that mandatory. I think that’s the only way you can increase savings levels, and then we make an element of savings accessible. It seems that this concept has gone down very well with work and with the regulator, with the Treasury. So hopefully we’ll see something along those lines very soon that will have a hugely positive effect on the members and the industry.

FIFI PETERS: It also reported an increase in new business this time around. Give us an idea where these inputs come from.

DAWIE DE VILLIERS: This was the highlight for me. I always feel like a business, if new clients want to join you and partner with you, that says good things about what you are doing and where you are in your life cycle. So for me that is comforting. The other positive part is that new business has become pervasive in all the different areas of our business, from investing to consulting to peer consulting, and individual consulting has been a star. Our individual business has grown much more than the market and [there’s] many new businesses.

Health consulting has been quite positive. So since our change in our management roles, we’ve gotten three or four large independent clients in addition to this acquisition now. I think things are going well and the fact that it is widespread is very positive.

FIFI PETERS: It’s okay. Lastly, you have a new president sometime next year in the form of Daniel Mminele. By the way, it’s good to see her face reappear. However, how did that happen and why was he the perfect candidate for the position?

DAWIE DE VILLIERS: Well, first of all, Marilyn Ramplin, who is our current president, did an excellent job. She has been with Alexander Forbes for more than 10 years in various capacities, and as president for the last two years. He has been one of the biggest positive influences on the company, even outside of it. But he has a huge business that is growing quite fast with a young family, so he decided to focus on that. But again [in line with] his personality, he said, until we have a suitable candidate and we need enough time to join us and have the right succession, he will stay.

We look at Daniel; I think Daniel adapts perfectly to our environment, for what we want to do. There will be many regulatory effects. Your stature in the market in terms of the future we want to go to, the impact we want to have in the country and [indistinct]…… 9:55

FIFI PETERS: Many of us are excited to see his name make a comeback on the formal corporate scene.

Dawie, we’ll leave it there for now, sir. Thanks for your time. Dawie de Villiers is the CEO of Alexander Forbes.


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