Alexforbes plans to more than double the rand value of its in-house financial adviser book over the next three years.
SA’s largest multi-manager plans to achieve most of that growth by expanding its adviser force from about 200 to 400 over that time frame. The plan forms part of its strategy to provide best-of-breed advice on investments, health and retirement planning to its more than 1.5-million clients in the employee benefits and administration space.
CEO Dawie de Villiers says he is confident this strategy will enable Alexforbes to double the size of its retail-focused financial adviser book, which has about R90bn in assets under management (AUM), over the next three years.
In addition, he says Alexforbes’ adviser book can then be further augmented by buying out the practices of independent financial advisers (IFAs) or simply partnering with those who want to retain their own businesses.
“We’ll probably grow our financial adviser force by more than 100% over the next three years at least, and more than double the book, which is currently at about R90bn in AUM,” De Villiers said in an interview.
“We’ll do it in two ways — we’ll hire our own advisers and we’ll partner with IFAs or buy their practices and take them in-house. We used to only talk directly to probably 10% of our 1.5-million members in the employee benefits consulting space so if we can double or triple that it’s a massive tailwind for us.”
De Villiers has spent much of his more than four years in the hot seat overseeing Alexforbes’ exit from insurance, a process that has left the business about a third smaller after a raft of asset sales mainly to Sanlam.
However, that process has left Alexforbes a far leaner, debt-free operation with a healthy cash pile to fund acquisitions as it looks to rebuild scale in the advice, administration and employee benefits space.
“All of the cash we generate we pay out in dividends — we probably pay about half-a-billion rand in dividends every year,” he says. “We also have a debt-free balance sheet and we’re highly cash generative, so we could quite easily get access to cash in excess of the R1bn mark if we needed to make a sizeable acquisition.”
However, the group is now more focused on growing its adviser footprint and smaller bolt-on buyouts within the employee benefits and administration space. That is probably because it is still busy integrating the purchase of Sanlam’s stand-alone retirement fund administration business as part of the R154m deal it announced in December 2021.
“The acquisition of Sanlam’s stand-alone book was big and it’ll still take us another 12-months to fully on-board,” says De Villiers. “That’ll add probably 300,000 to 400,000 members to our platform. Our business is all about scale. You have to be big to spread out the cost across a bigger footprint to cover the investments you have to make into IT, dealing with the ongoing regulatory changes and other improvements.”
Pleasingly, Alexforbes is still growing despite the bleak state of SA’s economy, which is forcing it to steal market share from competitors as the domestic savings pool continues to shrink. The group’s May 23 trading update showed it expects a 42%-47% jump in headline earnings per share when it releases its full-year financial results on June 12.
Nevertheless, De Villiers remains concerned about the grim outlook for the economy given that he describes Alexforbes as a “true SA Inc stock”, the term used to describe companies whose fortunes are highly correlated to the domestic economy. As a qualified actuary he is well placed to assess such risk.
“Every time someone is retrenched in this economy we feel it because we get a percentage of salary as a fee,” he says. “We can have the best strategy, the best people and the best plans, but if there’s no growth in the economy we can’t really grow either. If corporates don’t grow, we can’t grow.”
Nevertheless, the fact that Alexforbes is growing even as the economy teeters on the brink of recession gives him confidence in the group’s long-term prospects. He says all SA needs is to “get one or two things right” and the nation’s fortunes — as well as those of Alexforbes — could improve dramatically.
“Right now is probably the darkest point the country has been at, even if you include the Zuma era, but imagine if we get one or two things right as a country,” he asks rhetorically.
“Half of our business is asset based and is dependent on the markets — if the market goes up we get a percentage. But the rest of it is very reliant on people so if SA’s economy grows and more people are employed and more businesses are started we grow naturally,” he says.
“If a company invests in a new plant and hires 2,000 new people that’s potentially new clients for us on consulting, administration, health and anywhere else where we have a touch point.”
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