PSG wants more black advisors

“It’s absolutely a strategic priority for us. We’re not doing it only because of employment equity or BEE scorecards. There’s a commercial imperative. The black middle class is increasing in terms of both wealth and spread across the country, particularly in metropolitan areas,” Gouws, who would not comment on how many black advisors PSG has, told Moneyweb via telephone on Wednesday.

The Institute of Race Relations (IRR) estimates that the black middle class is now the same size as the white middle class, but believes that only one in ten South Africans can lay claim to a middle class standard of living, which it defines as household spending of R10 000 or more a month, appliance ownership of a certain standard, medical aid coverage and property ownership.

One of the key reasons PSG Konsult grew assets under management (AUM) for the six months to August despite market volatility is because of a growth in its advisor numbers, Gouws maintained, indicating that it needs black advisors to reach black clients.

The financial services company – which offers wealth management, asset management and short-term insurance – grew AUM by 17% to R151 billion over the period under review. Assets under administration climbed 21% to R321 billion.

“Over the last year alone we have hired another 38-odd advisors. Over the last three years our advisor numbers have been growing at somewhere between 5% and 7% a year,” Gouws said. At August 31, PSG Konsult had 667 financial advisors.

According to its 2015 annual report, PSG Konsult now has a learning and development manager driving its two-year advisor learnership programme. Since its launch in 2008, the learnership programme has trained 46 advisors, 24 of who are now employed within the group, the report shows.

Gouws believes advisors join PSG because it’s “a good home”. “We manage their marketing and technology, and provide a range of services to automate certain functions, which means they get to spend the majority of their time in front of clients,” he explained.

Regulatory changes have also driven advisors to safe harbour corporates. In particular, the Retail Distribution Review (RDR) – which will significantly change how financial products are distributed – has left many advisors concerned about income streams due in large part to a shift from commission- to fee-based income.

Gouws believes RDR will have a net positive effect on PSG Konsult. “What RDR is trying to achieve is to give clients better outcomes. If you’ve got highly qualified advisors, you’re obviously in a better position to understand the needs of clients and ensure those needs are met,” he said.

Growth in offshore offering

Its first international acquisition in three years, PSG Konsult recently acquired a 70% shareholding in Mauritius-based DMH Associates (DMH). DMH is a founder-operated business that was set up in 2003 to provide advice to entrepreneurs and high net worth individuals.

The investment will help it grow its client base in South Africa, Gouws said, enabling it to more easily internationalise the assets of its South African clients and access various offshore opportunities.

PSG Wealth’s offshore stockbroking offering expanded during the period to include additional foreign markets and will introduce offshore unit trusts later this financial year, it said in a stock exchange filing. “This will give clients the ability to view and transact both local and offshore shares, exchange traded funds and an extensive range of local and offshore unit trusts through a single log on,” PSG said.

While he would not disclose what proportion of client assets is invested offshore, Gouws said this figure has increased at a “very rapid rate” over the course of the last number of years. “Interestingly, it has accelerated as the rand has deteriorated,” he said.

Gouws said PSG will continue to prioritise organic growth in its domestic market, where it has low market share but is expanding rapidly.

For the six months to August, PSG Konsult grew recurring headline earnings 27% to R186.8 million and declared an interim dividend of 4.4 cents a share, 10% ahead of the prior period.

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