South Africa's largest dealer group is jettisoning the tied planner model after researching the Australian market. Masthead is reorganising the group after an analysis of Australian financial services companies found the tied planner model did not fit with the interests of consumers.
"What we saw were dealer groups owned by the likes of AMP and recognised that ultimately it can't work", Masthead managing director Peter Dempsey said. "The consumer will ultimately always be suspicious of what is the intention of the activities of the single company that owns it."
The dealer group, which has 2800 independent financial advisers (IFA), is currently restructuring to have shareholdings owned by the four largest financial institutions in the country. Masthead was previously 75 per cent owned by South Africa's largest financial services company, Old Mutual, and 25 per cent owned by the IFAs.
Under the new structure, the majority shareholding, 25 per cent, will be held by the IFAs, Old Mutual will hold 20 per cent and the remainder will be held by the next three largest South African financial institutions. None will hold more than a 20 per cent stake.
"We have been beating the same drum all along", Dempsey said. "For a healthy industry to survive you need to balance consumers' interests with companies' interests, with advisers' interests, with the regulator's interests. That's not going to happen if we are owned by one company. They are like the four legs of a stool, those four legs have got to balance and they typically aren't. If you can get the balance right, what you can achieve is greater transparency within the relationship between these parties and ultimately better advice".
Masthead holds regular quarterly meetings with the Financial Services Board, the National Treasury and the press to discuss its three and five year plans in an attempt to foster transparency. It's currently a culture of suspicion and by holding meetings like these we hope to overcome that", Dempsey said.
South Africa also has a government appointed ombudsman to look at advice-related complaints, independently from the industry. "This is not like the Australian system where ASIC merely ticks the boxes; the ombudsman takes a fairness and equity approach and says 'I don't think this is in the interest of the consumer; and will hand out the appropriate penalty, financial or otherwise", Masthead general manager Ian Middleton said.
