Financial services’ trust deficit hinders acquisition of black middle class customers

Dez Tswaile of Masthead on its core services offered, fee structure, investment philosophy and gaining the trust of clients.

RYK VAN NIEKERK: Welcome to this Financial Advisor podcast, it is Moneyweb’s weekly podcast where I speak to leading financial advisors. My guest today is Dez Tswaile of Masthead Financial Planning and he’s a young and upcoming financial advisor that has been in the business for about four years. He has worked at African Financial Group and he was also a wealth management planner at Inkunzi Wealth Group. Dez, welcome to the Moneyweb studio. The Masthead Financial Planning business is actually quite an interesting one and it allows you to build your own business within larger organisations. Tell us about how exactly it works.

DEZ TSWAILE: Ryk, thank you very much. As you say, Masthead Financial Planning really is a very nice platform for independent financial planners to be involved in or operate under, as they would be the license holders within the Financial Services Board and we would practice as financial planners as representatives of the larger brand or the financial services provider license holder. However, within the practice, as a financial planner, you are given an opportunity to really build your own practice within the bigger umbrella and that is really fantastic because with that book that you have built, you can also build value within the business and you can sell it off at a later stage should you wish to do so.

RYK VAN NIEKERK: Masthead has been owned by Old Mutual. Are you affiliated with Old Mutual as an advisor? Do you need to use their products, for example?

DEZ TSWAILE: Fortunately Masthead is built on a platform that supports independent financial advice. So as much as we may be affiliated to a certain degree, we are not really obliged to market and sell only Old Mutual products. So it is really open-ended to all the other product providers that we can have relationships with.

RYK VAN NIEKERK: But the responsibility is with you to find clients – I know any financial advisor will tell you that is difficult to do. Who are you targeting and what is the type of client you would like to attract?

DEZ TSWAILE: Ideally I would like to attract a client who is, one, offering a professional service. In most cases it’s going to be in a service sector [rather] than [in] is selling a product. Services can range all the way from engineers to professionals like lawyers, doctors and so on, but in that professional space, whether they are running their own businesses and/or operating or working for somebody else and they are family oriented with young dependents, those are the kinds of people I’m really looking to attract. By professional I’m not necessarily meaning that they have to have a post-graduate degree, but even an undergrad. … those are my key people who I’m looking at, your middle-income earners and people who have a growth projection within their careers.

Advantages of a young advisor

RYK VAN NIEKERK: But obviously you want to target younger people? I don’t think it’s often that you see clients changing financial advisors – it’s a growth process. I think the perception is you need to have an older financial advisor because they in theory have more experience and will be better than a young one. What advantages do you think a young advisor like yourself would be able to offer these potential clients?

DEZ TSWAILE: Interestingly enough, as you said, the industry that we’re in is more about a relationship than anything. That’s at least how I view it. That the longer time I have with you as your advisor the more time we have to adjust in terms of your plan on a year-to-year basis and over time help you achieve your objectives. [If] we have a relationship now and see you through it until post-retirement that is really the goal, because that may be reached over a 20-year or 30-year period. Unfortunately, interestingly enough, what we see in the industry [is] that a lot of younger people basically have changed a lot of advisors through the period of time, just as much as they also changed jobs. However, what I’m looking for and what I’m offering to at least a large group of my clients is longevity, for us to be able to have a long-term relationship and see my clients through everything that they need to get to their objectives.

Core services offered

RYK VAN NIEKERK: What are the core services you offer?

DEZ TSWAILE: I have broken down my core services to what I feel would be more acceptable as a language to people, because when you say ‘risk planning’ people start to think ‘what are you talking about?’ … but I would like to call it ‘wealth protection’. That’s more on the insurance side, so that’s death cover, disability cover, income protection cover and so on. However, my specialty and what I like to concentrate on is really investment planning and also when it comes to investment planning there’s quite a large array of what is available out there that a person can be involved in. I also offer to SMMEs employee benefits, including business assurance.

Lifestyle insurance

RYK VAN NIEKERK: Do you think South Africans take it seriously enough – the disability and death-type insurance product? It is such a big risk in South Africa: we’ve got dangerous roads, we live in a country where there is a lot of crime. Do you think the normal rank and file South African appreciates that you need to have these products to ensure that you can leave a legacy to your family should something happen?

DEZ TSWAILE: Unfortunately not, Ryk, and, honestly speaking, this is also part of my key message to everyone out there to say that it’s a lifestyle management programme or plan that one should have. A lifestyle that you are living and that you would want to at least retain … should anything happen to what it is that you are so dependent on, which is in most cases the one stream of income that everybody really has and if you can mitigate risk factors to say that should any of these happen or life events happen, you at least have something that will retain some form of lifestyle management that you were on. Also looking at post-retirement – because you are no longer receiving that income – do you or have you saved enough that would give you a similar lifestyle, including, like you said, legacy planning? How then do you have generational wealth so that you maintain a certain lifestyle that is really manageable from generation to generation?

RYK VAN NIEKERK: I think many people don’t appreciate that your biggest asset is not your house or money in the bank, but it’s your ability to actually earn income and you need to protect that.

DEZ TSWAILE: That is correct. In fact, that is the biggest one.

Emerging black middle class

RYK VAN NIEKERK: In South Africa we have social problems but we also see an emerging black middle class, which is growing very quickly. It’s actually the biggest single class growing in South Africa and that must be a significant opportunity for many financial advisors. How do you penetrate that market?

DEZ TSWAILE: It is quite a difficult market to penetrate. …I think it is an issue of a trust factor that was never really addressed from the get-go, because when we’re talking financial services products there has unfortunately also been a lot of infiltration of people who are tainting the market very badly or painting a bad picture about financial services in its entirety, including the fact that people are not so happy with a lot of changes that happen in the banking sector that sometimes they only catch on after a while. So the trust element is quite a difficult situation to get over. However, once we have broken that [barrier] to say this is where we can help and I have confidence in what it is that we are providing…. Most importantly for myself as well is to increase the trust element, it’s not to talk about product names or product brands in particular, but more about products and solutions that are fit to help a client.

Gaining the trust of clients

RYK VAN NIEKERK: But how do you overcome somebody that is sceptical about the system? I imagine that many people only look at the fees and say ‘no way, I’m not paying that for financial advice’. It must be a difficult thing to actually convince somebody to take a retirement annuity and pay the fees that some institutions charge?

DEZ TSWAILE: That is very correct. The unfortunate part about looking at fees within the service industry is because you don’t have a tangible product that you can say I have paid money for this and this is what I’m taking with. However, if we can successfully convince the client and they understand the product that they are buying or a solution that they are buying and they can see the value-add that you are providing in their lives, then they are more accepting of the kind of fees that we are charging. Also not forgetting that there are a lot of regulatory changes that have happened over the past decade or so that actually also bring a lot of alleviation to the pain that a client goes through when they’re talking about fees and they get to understand a bit more of what it is exactly that they are paying for.

RYK VAN NIEKERK: Do you think there’s too much regulation within the financial advice sector?

DEZ TSWAILE: As much as I believe that there is too much, I think it is also a bit fair considering the fact that people have been hurt by very unscrupulous practitioners who are not even within the regulatory framework, who are overpromising and/or are selling a pipedream – something that will never be realised. At the end of the day people basically lose their hard-earned money to these very unscrupulous people. So within the regulatory framework I think it’s quite necessary to a certain degree.

RYK VAN NIEKERK: That obviously adds to the trust deficit that you referred to earlier.


RYK VAN NIEKERK: You are trying to build your own business within this regulatory environment; do you see it as a hindrance or with the relationship with Masthead are you able to actually manage within the business, within reasonable expenses because it is expensive to comply?

DEZ TSWAILE: That is correct and fortunately enough I think the platform that we are on – and working closely with Masthead as a compliance officer – it really is helping us to basically play along with what the regulations require. So we are up to date with the regulatory changes and the regulatory requirements and we are really pushed to basically comply as much as possible to those. It will really also help us fortunately, that when certain changes are implemented we are ready for them and we can still build our businesses over the challenges that one would imagine to have within the regulatory framework that keeps changing.

RYK VAN NIEKERK: The financial advice industry is actually quite a small industry – I believe there are fewer than 5 000 qualified financial advisors in South Africa. But there are very few black advisors, especially relative to the number of white advisors that there are. Why do we not see black advisors coming through?

DEZ TSWAILE: I think in my own perspective [it] would be the building of a book, a client book. Initially it is very slow to build simply because of the challenges that we have already spoken about, the trust deficit that is there and the lack of understanding about what role a planner really has in one’s life and for those who basically have an understanding towards it they are less likely to give an opportunity to somebody else who is relatively inexperienced according to them and who has done less than 15 or 20 years in the industry. However, with what has happened in terms of the growth of advisors they have really learned a lot about the products that are available and we can really offer just as much [at] the same level of service as the most experienced one.

Investment philosophy

RYK VAN NIEKERK: Dez, what is your investment philosophy?

DEZ TSWAILE: My investment philosophy really revolves around a client, so it’s client-centric investing and also long-term value creation for clients. … whether it’s picking up value products or investment opportunities as a combination, but it’s really client centric.

RYK VAN NIEKERK: But obviously you need to have views on asset classes, because you need diversified portfolio exposure to asset classes, but there are many advisors who differ on exactly that allocation. How would you, as an example, divide that up in asset classes for a young person’s retirement annuity?

DEZ TSWAILE: Interestingly enough we don’t have as many asset classes out there – we can count about five – but at the same time we have many different vehicles that are offering these same asset classes. But how you allocate the assets in terms of weighting it really depends on the client’s overall objective and the timeframe that they require. So it’s not going to be the same type of allocation for every single client. Yes, one can pull a certain client that has an inclination towards a similar objective over a similar period of time, but really there is no one asset class and direction that I would say it is my preference. So it is more about the client’s objective and there is a combination of asset class allocations that one can do to really achieve the client’s objectives.

RYK VAN NIEKERK: Do you think it’s the advisor’s role to make the asset class decision or should you leave it to the actual fund managers you invest your client’s money in?

DEZ TSWAILE: Let’s look at it this way: how many fund managers are out there? There are quite a lot … but for you to even select the right fund managers for your clients, you need to understand what their processes are like. So I think it’s equally important for advisors to be able to have a system where they can filter down to a pool of fund managers that you would really like to use, but understanding what their investment philosophy is and what their processes are so that when eventually you start deciding how much or how are you allocating towards each of the fund managers then you would anticipate the kind of results that you’re looking for. At the end of the day it’s a dual role: the fund managers have their role in terms of choosing the asset and the asset allocation, but we as advisors also have a role in terms of choosing the right fund managers and that is the reason why some of us even charge fees like management fees or annual management fees because there is a lot of work that we still have to do in the background.

RYK VAN NIEKERK: Dez, thanks for coming into the Moneyweb studio and good luck with your business and may it grow faster than you can handle.

DEZ TSWAILE: Thank you very much, Ryk, and thank you for the invitation.

RYK VAN NIEKERK: That was Dez Tswaile of Masthead Financial Planning.


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