23 August 2024
The Glacier IdeasLab 2024, the first series of in-person engagements of this kind since 2019, was hosted in Johannesburg, Durban and Cape Town, between 20-23 August 2024, respectively. Attended by intermediaries across the three regions, the agenda of the day centred on unpacking what stability in evolution means across Glacier’s business.
Our panel of experts explored aspects of evolution in investing and how this is imperative to ensure sustainability into an uncertain future. The presenters focused on an economic overview; an update on how Glacier is solving current and future challenges in its business; and how the humans at the heart of investing are using technology to create greater efficiencies and design an exciting tomorrow.
An update on Glacier’s business and an overview of the industry,
Khanyi Nzukuma | Chief Executive | Glacier by Sanlam
The investment future is bright as the tide has slowly turned, with a significant reduction in interest rates forecasted by the end of 2025. Focusing on the political and regulatory environment, the shift in politics and the positive sentiment that has followed, are providing opportunities in the industry for Glacier and the intermediaries with whom we partner.
At government level, the Government of National Unity (GNU) represents realignment to the goals of our democracy. While we are excited about the GNU, the government is still largely the same. The public will continue to keep an eye on and hold the GNU accountable for critical service delivery, infrastructure challenges and how the energy crisis will be managed.
The market response to the GNU has been positive, with the rand strengthening by nearly 5% and the JSE Top 40 having outperformed global indices in the last few months.
What, currently, is driving our industry?
Dominant themes in the industry
- The Two-Pot Retirement System and its implications for savings in the industry.
- Longevity is a huge risk in retirement planning, and access to retirement savings through Two-Pot could increase this risk.
- Consumers’ economic pressure which leads to outflows.
- Interest rates not coming down quickly enough.
- Increased appetite among investors for offshore investing, following the bounce-back of global equities.
What’s been keeping Glacier busy?
- The Two-Pot Retirement System is upon us. From a business perspective, Glacier is ready with respect to systems and processes. However, the likely impact is unpredictable. Already, R360 billion leaves funds every year across the industry. About R140 billion of this is due to resignations. When Two-Pot is vested and the hype settles, the industry is likely to retain R100 billion in the industry as a result of this legislation.
- Building the post-retirement capability. From a post-retirement planning and investment perspective, Glacier has the largest annuity book. Steady performance coupled with alignment to Sanlam stand Glacier in good stead to be the most dominant player in post-retirement solutions.
- Growth of discretionary fund management (DFM) solutions and capability enables intermediaries to be involved with their own portfolio construction and to ensure more successful outcomes for clients.
- Glacier stands on the shoulders of Sanlam, a giant in financial services in South Africa and Africa. We align with Sanlam’s vision to become the most admired financial services group in Africa.
Glacier’s strategy – focused on the main things embedded in its five-year plan
- Glacier is and will remain an intermediated business, and it is not our intention to circumvent intermediaries and engage directly with clients.
- Product innovation is the second key success factor which considers persistency, market volatility and diversification.
- The third factor is tech modernisation which addresses inefficiencies and costs and ensures:
- Leveraging industry consolidation
- Increased scale
- Access to new distribution channels
- Synergies, new skills and innovative solutions
How does Glacier stack up in the industry?
- Glacier has the most under administration – local, offshore and guaranteed solutions – and the most diversified suite of solutions.
- Glacier supports the role of the adviser, which cannot be underestimated on the client’s journey toward financial confidence.
- An adviser adds around 4.91% of additional value in a portfolio, as a result of services such as, among others, behavioural coaching, active rebalancing, as well as customised wealth, estate and tax planning.
- Since 1997, Glacier has supported intermediaries through knowledge-sharing, skills enhancement, solutions, client servicing, consulting, research, technology and discretionary fund management.
Digital transformation for a successful tomorrow
Johann de Wet | Chief Operations Officer | Glacier by Sanlam
Glacier’s digital transformation journey began in 2022, driven by two key questions: How does Glacier ensure sustainability? How do we support and enable the key stakeholders in our value chain
The following areas are undergoing transformation for clients and intermediaries:
- Products and solutions – responding to client and market needs.
- People – developing people and providing opportunities for exposure to new thinking and technology.
- Operations and processes – tackling the inefficiencies in our business by ensuring streamlined data capturing and straight-through processing.
- Technology – technology as an enabler is key, with all our processes and solutions in one place, and data is critical for us and for intermediaries. We will use machine learning and AI where this makes sense.
How can we use data for better client relationships and boost business?
In the case of Two-Pot, it will be useful to know how many clients will access their savings pot as well as to have a 360-degree view of the client. Equally important is to establish how we use beneficiary information to ensure business retention.
We have found that in the investment-linked life annuity (ILLA) book, R6.5 billion of under management have no beneficiaries listed. How can tech help you establish beneficiaries for your clients and better understand them? Do intermediaries foster relationships with the beneficiaries who are linked to the that they advise on in their practice?
Technology, AI and the humans at the heart of investing
Phil Carden | Head of Digital | SS&C
What is the metaverse and what is its potential in our world? It’s the next generation of the internet and encompasses a vast collection of experiences characterised by rich digital activities, such as gaming, that could translate into the world of commerce. Almost anything that you can do in real life, can be replicated in the metaverse.
Metaverse global activity
There are many examples where brands have invested in the metaverse. For example, Coach has pursued the idea that real-life humans will spend money to style their avatars in the metaverse as they are styled in the real world. Disney and Vans have pursued similar ideas. Vans’ metaverse skate park and virtual store attract 100 million users.
Metaverse is a risk-free environment for experimentation and proof of concept.
With the global population being just over 8 billion, with 38% being gamers, it is important to know that 80% of gamers are over the age of 18. The opportunities for engagement, commerce and advice remain largely untapped to the gaming audience; one that prefers limited human interaction with brands.
The metaverse lends itself to consumer information, education, product awareness and unpacking concepts, by using storytelling, gamification, and quests. However, not everything in the metaverse should be self-service, but this world provides a link between tech and the advice that is best given by an appropriately authorised intermediary.
Importantly, the conversation that happens in the metaverse between client and intermediary, can be used as knowledge that informs client relationship management systems. Data in these conversations can help inform the advice given, portfolio construction, and holistic financial planning.
How can advisers prepare for the metaverse?
There are not many steps from where we are now to where technology is going, and there are many ways to configure the environment, but perhaps the first step might be to create a Glacier environment in the metaverse where the intermediary has a digital office.
The history and evolution of asset management
Paul Wilson | Chief Investment Officer | Glacier Invest
The pre-1980s was the Wild West in asset management, with limited regulation and advisers investing clients’ funds and hoping for the best. In the 1980s, indexing was a game changer, and then in the 1990s, multi management meant fund selection was made easier. Alpha and beta in the 2000s were a good development but the results were not great, while multi- in the 2010s continued until 2017. In the 2020s, solutions architecture has meant customisation for client requirements, and it is an approach that Glacier Invest has pursued with vigour.
Now and into the future, what’s next? The 2030s will be characterised by data-driven solutions. AI will have an impact, and success will hinge off the industry players’ ability to harness big data. Greater, acute customisation is what this is all about.
It is difficult to imagine a world without intermediation around investments, but the use of data will be critical. Tech, data and human advice, and how these three components work together will decide the winners.
Current trends in asset management
- More emphasis on exchange-traded funds (ETFs) than stocks.
- Trading crypto currency – the size of this market is USD2.35 trillion.
- Crypto ETFs constitute over USD50 billion.
- Actively managed certificates (AMCs) are now worth USD1 trillion globally, but there are advantages and disadvantages of AMCs. Unit trusts are restrictive, while AMCs are less restrictive with a far wider margin for success.
- The shift to alternatives has been significant. Alternatives continue to generate more than half of global revenue, despite representing less than a quarter of total AUM. However, alternatives are difficult to access and illiquid.
- In South Africa, the big asset managers will be moving more and more into the space of alternatives with a focus on private equity. Regulation and fee pressures may be pushing them in this direction.
- In South Africa, hedge funds are increasing in focus as is investment in infrastructure.
- Attention must be paid to the change in concentration of the top five shares over time. The top five dominate 30% of the markets. This kind of dominnce is not a new phenomenon, though. Over time, transport, resources and energy dominated, now, it’s technology.
- Knowing which asset managers are good offshore, is critical when including offshore in portfolios, especially with the 45% allocation. Regarding including offshore, it’s no longer ‘if’, but ‘where’ and ‘with whom’.
Building integrity into the bedrock of client service
Natashja Terblanche | Executive Head of Client Service | Glacier by Sanlam
There is the perception that fraud is something that happens elsewhere. Intermediaries need to be aware of what’s happening in their practice as there are multiple ways that fraud can exist in business.
Examples of cases include:
- Deceased estate fraud in the Master’s Office.
- Impersonation of individuals through phishing and identity fraud.
- Intermediary and client disputes where clients have been assigned a new broker or intermediary without their knowledge or permission.
What to know about fraud cases:
- They create time- and resource-consuming investigations.
- They create trust issues between intermediary and client and intermediary and provider.
- They cause reputational damage.
- They result in financial losses.
- They require process enhancements that lead to increased costs and frustration
What are we doing to mitigate the risk of fraud at Glacier?
- Identifying the fraud trends in the industry and beyond and aligning our processes accordingly.
- Implementing extensive training programmes to ensure that Glacier employees know what to look for and the red flags, before fraud happens.
- Working with intermediaries and sharing information to ensure awareness and what to do to protect data and clients’ investments.
View presentation
Keynote address: How to gear your business for sound governance
Cynthia Stimpel | Whistleblower House
State capture was the invisible looting and went on for 10 years in South Africa. Without whistleblowing, the digging would not have happened. Whistleblowers helped the Zondo Commission establish that about R3 trillion was extracted from South Africa during state capture.
Considering the damage in Transnet, Eskom, Prasa and SAA, we have to ask what could have been done and achieved with all of the funds that were diverted toward corrupt ends?
Corruption case study
Enterprise Outsourcing Holdings (EOH), is an IT software company in SA, founded in 1995, and focusing on financial services companies. They experienced rapid growth in a very short period of time, through dubious means and manipulation of tender and bid processes. Fraud became the company culture.
Four key areas of corruption and fraud at EOH
- Corporate capital market
- Bid rigging in the public sector – ‘buying the bid’
- Defrauding suppliers and customers
- Petty corruption
Bid rigging for public sector tenders and irregularities in several procurement processes became the norm as did ‘middlemen’ – politicians who were paid to ensure that EOH received the contracts.
It was also the norm for employees who were complicit in these practices, especially defrauding suppliers and clients by falsifying invoices and non-delivery of services.
In fraudulent organisations, informal networks are rife. These networks ensure that the criminals are protected by their cronies in the organisation. This ‘buddy’ system ensures ‘no questions asked’ and swift compliance and finance signoffs.
Stephen van Coller’s anti-corruption strategy
When Stephen van Coller was appointed as the new CEO, he instituted the following:
- A rules framework with enforcement and consequences for non-adherence.
- He removed the informal networks by ridding the organisation of known perpetrators of fraud.
- A full risk management/internal audit/forensics capability.
- Policies and procedures for all disciplines within the organisations.
- Used Hofstede’s 6 Dimensions as a basis for culture change.
- Considered the external environment of EOH and how this impacts on the organisation’s operations.
How do we gear organisations?
G - Governance
E - Ethics
A - Accountability
R - Responsibility
