“But we must be clear – the key problem is inequality. Transformation is a tool to reduce inequality. It is not an end in itself.”

He pointed out that because of the deep scars of the past, inequality is closely related to race and gender in South Africa.

He lauded Argon for its “enviable reputation as a transformed asset manager in a highly competitive industry”.

In Nene’s view the recent global financial crisis has revealed the central role the financial sector can play in creating and entrenching inequality.

“The financial sector provides tools which can deliver transformation, but also itself requires transformation. The financial sector is both the instrument to correct broader societal imbalances, but may also contribute and, at times, exacerbate those very imbalances.

New products, new young managers

In Nene’s view, it is not in order to design investment or insurance products that require full time employment, with a fixed monthly debit order with heavy penalties for missing one or two payments that cannot be made up.

“Many of our people are on small incomes. How does the investment industry help them achieve their dreams?” he asked the audience.

“Financial providers can also design products to the benefit of shareholders rather than financial customers through opaque, predatory pricing and other poor market conduct practices.”

The National Treasury has recently highlighted that high costs for retirement funds erode savings. This is in part due to high fees charged by investment managers.

“These poor practices taint the industry. They are a legacy of an industry that focused on profits and fees,” said Nene.

“New, young, dynamic, transformed asset managers play a crucial role in driving better behaviour in the industry. Ultimately, an efficient and affordable investment fund industry, which helps the poorest and most vulnerable in our society save for retirement, is in the interest of all of us.”

Financial institutions will, therefore, need to show that they are not only meeting the minimum rules set, but that they also have an entrenched customer-centric approach to their businesses across the product life-cycle.

In the medium term, SA also needs to address the issue of the retirement of vulnerable workers, Nene pointed out.

Black asset managers

“As industry players I hope you will have a frank discussion on initiatives that can be embarked on to increase the percentage of assets managed by black fund managers as a percentage of total industry assets,” said Nene.

It is clear to him that any policy which allows for greater transformation within the financial sector leading to a demographically representative sector with proportionate earnings and ownership, is necessary, but not sufficient for South Africa to fully meet is objectives.

Source and reference: http://www.fin24.com/Economy/Vital-for-financial-services-to-transform-Nene-20150511