A recent reading of the Quarterly Labour Force Survey from Stats SA (Quarter 2: 2021) made for some interesting reading and pondering on the evolution of the SA consumers over the next 10-20 years. One of the observations which stood out was the approximate 1.5 million employed South Africans over the age of 55 years, all of whom will be retired in the next 10 years.

A basic understanding of accumulation of wealth and compound interest would suggest that these are of the wealthiest people in South Africa, holding a large percentage of the long-term savings and investment industry. As a matter of fact, these South Africans will be moving from positions of active savers to positions of carefully drawing down on their savings in retirement. The shift though that I would like to focus on in this discussion, is the approximately 9 million employed South Africans between the ages of 25 and 44 years of age. This cohort represents roughly 60% of todays employed economically active labour force and interestingly are almost 90% black.

Why is this an important point to be making in a discussion on the long-term savings and investment industry and in particular the asset management industry? The investment products and solutions which have been designed over the past 20 years in South Africa have generally been targeted at a specific demographic and many large institutions have designed their businesses around this model. We believe that the consumers between the ages of 25 and 44 years, particularly those who are able to save, are looking very hard at the solutions being made available to them and are asking very hard questions about the suitability, relevance and value thereof.

Unencumbered by the legacy of aging IT systems and old fashion corporate architecture, which too often stifles innovation in favour of process, emerging asset managers have more latitude for the inception of innovation and often the entrepreneurial flair to implement these ideas. Their ability to fail fast and take away learning is something that they have been implementing much better than at the large institutions. You may argue that many of the emerging asset managers of today are smaller “replicas” of the larger incumbent asset management businesses where they, the professionals, were trained and gained their experience. However, it’s this very size, agility and awareness of the needs of the clientele which, into the future, will give the emerging asset managers their competitive edge. We believe that the investment products and solutions in the next 20 years, for the long-term savings and investment industry, will more than likely come from the innovation and new ideas which sit at the emerging asset managers in South Africa.

This existential crisis is one of the top discussions at the highest echelons of many of the large financial services companies. It is at its core about the search for relevance in a changing market with an evolving clientele in what many are calling a new normal. As consumers look harder at the form and structure of the products and solutions being sold to them, their constantly refining tastes need to be met with relevance and value.

We believe that by spending more time with the emerging asset managers of today, investors and asset allocators will find the asset managers best geared for the next 20 years – which in our view will look very little like the past 20 years. Investors will identify the skills and depth of innovation sitting at these managers and in turn start to make more informed decisions regarding allocation of assets.

We are always excited to hear from you.

Mark Davids

Investment Strategy and Distribution

Cell: 083 222 9913

Tel: (010)110 8768

Fax: 011 656 1165

Email: davidsm@motswedi.co.za

Website: www.motswedi.co.za