q&a with the
chief executive
Q: In your first six months at Alexander Forbes, what have your impressions been?
A: In my first six months I have been extremely privileged to meet with a significant number of key stakeholders, including shareholders, investors, clients, suppliers and the regulator. I have also actively engaged with our colleagues across all of our territories and spent time in our call centres listening to interactions with our customers. Overall, I heard many positive stories, but I also heard about areas for improvement.
Alexander Forbes is a strong business with a great brand and rich legacy. On the positives, we have loyal client relationships, dedicated and talented colleagues and a number of leading businesses in our group. However, the business has not delivered on its immense potential and needs to address a number of structural issues to reposition for the future.
I believe that I understand the issues well and am focused on addressing them with clarity, pace and urgency. This is part of our ongoing transformation journey. The very essence of our transformation is focused on evolving our value proposition to have a clear focus on our customers, helping them achieve a lifetime of financial well-being.
Q: How would you describe Alexander Forbes’s approach to creating value?
A: Value to me is all about making sure we are there for our customers – both corporates and end consumers. For corporates, this means getting the basics right: allowing them to exercise their fiduciary responsibilities and helping them to enable their employees to be happier and more productive. For the consumer it means offering educational financial advice and ensuring that they have a plan for their future. In demonstrating our value to our customers we add value to all our stakeholders in a sustainable way.
We are therefore focused on creating value through being a trusted partner for financial solutions at every stage throughout the life journey. For a lifetime goes to the heart of helping customers protect themselves financially; it means helping them to use the assets they have built up over their lifetimes to ensure they are able to retire with peace of mind.
“Over the five-year period to 2022 we want to achieve revenue growth at or above market and deliver positive operating leverage. This should translate into improved operating profit growth, margin enhancement and improved cash flows.”
Q: How did Alexander Forbes perform over the 2017 financial year?
A: Overall our performance was satisfactory, showing resilience in the context of a challenging economic and political backdrop in South Africa and other markets we operate in. In my view this demonstrated strong resilience. We delivered positive operating leverage, improved margins at both a group and divisional level, delivered growth in profitability, improved expense efficiency and sustained growth in our dividend payout alongside payment of a special dividend. Over the course of the past three or so years we have paid out close to 15% of our market capitalisation in dividends – also satisfactory. Over the course of the year we also set upon our business transformation with vigour, clarity and speed. We were able to attract a number of new leaders into the business, whilst building on internal strengths.
While more needs to be done, we are clear on our priorities, execution focus and ambition in unlocking value across the group.
Q: What is the group’s vision and strategy moving forward?
A: Our vision is to be a globally distinctive pan-African financial services leader. Our five-pillar strategy revolves around growing each of our businesses in a more integrated and collaborative manner, improving operational efficiency and embracing digital to improve the overall client experience. We also want to expand the penetration or retailisation of our member base with the concept of lifetime integrated and holistic solutions and advice.
In terms of key strategic focus areas the strategy across the group is centred around five clear priorities: (i) getting ‘back in the boardroom’ and improving cross-sell; (ii) making umbrella the core institutional growth engine to drive access to end consumers; (iii) driving SME penetration; (iv) using financial well-being to target the end consumer, leveraging data analytics and portfolio pricing; and (v) driving asset accumulation strategy across the group.
Q: The strategy focuses on an integrated customer value proposition – what difference will this make to your clients?
A: Historically we have engaged with our clients only at certain key events – for instance at retirement or at retrenchment. We are now focused on evolving our customer relationship to go beyond this. Our value proposition is about engaging with our customers at all stages of their life journeys to help them make the right financial decisions. We will do this by building stronger client relationships; by providing education and sound financial advice; and by delivering relevant, innovative financial product solutions. Everything we do is to help our customers achieve a lifetime of financial well-being and security.
Q: A key part of your strategy is emerging markets. How will you deliver this?
A: The emerging markets business has performed well over the last few years and I believe that this business has strong structural opportunities to continue to grow, both organically and inorganically. In the short term we intend to grow our business in markets where we see attractive opportunities. We will also consider inorganic activity to expand into new geographies where we believe this makes sense. We will be extremely cautious and disciplined on this.
Across our emerging markets business the majority of our customers are, what I would call, emerging middle class and they are increasingly demanding a broader range of retail solutions delivered to them in the manner of their choosing, typically digitally. To meet this demand we have developed, and will continue to develop, a number of leading-edge consumer solutions. In the corporate space we are already penetrating the SME sector, which is a direction in which we plan to drive the South African operations. We therefore intend to bring the DNA of our emerging markets SME strategy back to South Africa.
Q: What will your focus be in financial year 2018?
A: While we believe the economic outlook will remain challenging for the foreseeable future, we will focus on managing and controlling ‘what is in our hands’. This means an absolute focus on the customer with a clear brand strategy and customer value proposition. It means growing our business lines by leveraging our market-leading institutional platform, improving margins and taking the necessary tough decisions to improve structural expense efficiency, as well as solidifying how we collaborate with our strategic partners Mercer and African Rainbow Capital to accelerate the execution of our strategy.
We will also continue to focus on maintaining our solid capital position with strong cash generation while returning capital to shareholders.
We have loyal and dedicated colleagues and I am both humbled and proud to be leading them into the next chapter in the evolution of Alexander Forbes.
