Alexforbes occupies a unique place on the JSE. It maintains a dominant market share in the pension fund consulting sector, having bought out almost all the competing actuarial firms, including its archrival Ginsburg, Malan & Carsons. Today its main rival in full-service consulting is Willis Towers Watson (previously Fifth Quadrant).
Alexforbes leveraged its scale into the much more profitable field of multimanagement — picking managers and setting up pooled portfolios. The business, originally Investment Solutions, is now called Alexforbes Investments (AFI) and remains by some margin the largest contributor to the group.
When Dawie de Villiers took over in November 2018, he reversed the approach of his predecessors Andrew Darfoor and Edward Kieswetter, who had treated the company as a one-stop shop offering underwritten life and short-term insurance products in competition with the usual suspects such as Sanlam, Old Mutual and Liberty.
De Villiers, who previously ran Sanlam Employee Benefits, soon realised that Alexforbes was far too niche to take on these mammoths; it is an advice brand. De Villiers sold AF Life to Sanlam and its short-term business to Momentum.
De Villiers says it’s always a difficult decision to sell a business, “for various reasons, but mostly emotional about trying to grow it, the lost opportunities and losing a contributor to group overheads”.
But, he adds, “for us it was easy, given the in-principle decision to not own any ‘products’ and be 100% independent advice-led”.
De Villiers says Alexforbes wants to play where it’s best or can be the best and really add value for clients. He says it had to learn to partner, like when it sold its linked investment platform to Glacier. He believes this move improved overall service to clients.
The market has taken well to this strategy. Over five years, according to the Sunday Times Top 100 Companies list, the compound annual growth rate is 31.6%, about double that of Sanlam and ahead of all the big four banks.
Alexforbes has the opportunity and brand recognition to build a national network to rival PSG, though it would probably struggle to match PSG’s grip on the Afrikaans-speaking market and the platteland
The future for the business must be in the retail sector. Alexforbes has consistently punched below its weight in financial planning, which was seen as an ancillary service to retirement fund consulting. The CEOs and other top executives of Alexforbes clients would be offered their own personal financial adviser as part of the service — these brokers didn’t have to look for work.
But De Villiers is rolling out more hunters to complement these farmers. He has appointed Viresh Maharaj, who moved with him from Sanlam Employee Benefits, as head of retail to spearhead this growth. AFI has been re-established as a multimanager focused on building portfolios for independent financial advisers rather than for pension funds and other institutional investors.
This will allow it to generate income and earnings from advisers outside its network who want to build model portfolios, leveraging off AFI’s economic research team, the largest in South Africa. AFI is a larger multimanager than even the ones tied to the large insurers, such as Old Mutual’s Symmetry, Sanlam Multimanager and Momentum Investments.
Another string to the Alexforbes bow is health-care consulting, in which it helps corporates choose a suitable medical aid. De Villiers expects there will be increased revenue as corporates try to navigate the complexities around the introduction of National Health Insurance. But he admits that if private medical aid schemes end in their current form, revenue will decline — though there will still be opportunities to advise on specialist products and gap cover.
Alexforbes is in the asset manager and custodians subcategory. Its closest peer is Sygnia, run by Magda Wierzycka, who was an Alexforbes investment consultant in the 1990s. It offers investment products and multimanagement but no direct (stock and bond picking) asset management — unlike the other main constituents of the subindex, Coronation Fund Managers and Ninety One.
Alexforbes looks quite expensive with a p:e of 14, ahead of even the multinational asset manager Ninety One (previously Investec Asset Management) on 12.5 and the much less mature Sygnia on 13.8. It looks cheap only against PSG Financial Services (22), with which it competes in a number of fields such as multimanager unit trusts. But PSG has undoubtedly got the recipe right in the retail market, boasting the largest national network of financial advisers — it rivals even the tied agency forces at Old Mutual, Sanlam and Discovery, and is definitely larger than the Liberty and Momentum tied agency footprints.
Alexforbes has the opportunity and brand recognition to build a national network to rival PSG, though it would probably struggle to match PSG’s grip on the Afrikaans-speaking market and the platteland.
It won’t necessarily take market share from PSG itself. There are a number of financial advisers reaching retirement age who will have “orphaned” clients, and the large insurers are constantly restructuring their portfolios, exiting nonprofitable regions and closing offices.
But as well as its in-house planners, Alexforbes will offer funds to third-party advisers. PSG operates a closed architecture, vertically integrated model in which model portfolios are spoon-fed to advisers by the in-house multimanager. AFI can tailor portfolios to the specific requirements of its clients.
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