Growth lies in a transformed investment industry

(iStock)
(iStock)

Johannesburg – Transformation is important to create an inclusive investment industry, which delivers better outcomes for clients.

This is according to Delphine Govender, founder and Chief Investment Officer of Perpetua Investment Managers, who was speaking on Monday at the Association of Black Securities and Investment Professionals (ABSIP) Summit on transformation in the investment industry. Govender is also the deputy president of the organisation.

Transformation can contribute to economic growth if the industry is more balanced, she explained. “A level playing field creates employment and business opportunities.” The top five players in the industry own 60% of assets - a few players dominate the majority of the market, she added.

In South Africa, the majority of savers are black, however their service providers do not reflect the diverse reality of the population, explained Govender. “This is mostly because of the legacy of apartheid, 20 years later and we still have an imbalanced value chain,” she said.

There is growth in the industry, but not all participants get to partake in that growth. It’s hard for small firms to get access to the decision makers which allocate capital, she said. Decision makers act as “gatekeepers” making it hard for small firms to access funding, she explained.

Part of the solution includes policy changes which incentivise diversity in forms. And forms need to make transformation and diversity a strategic part of their goals.

Donna Sims-Wilson, chair-elect of the National Association of Securities Professionals (NASP) in the USA echoed these sentiments. “There should be diverse financial services professionals, that deliver outcomes from mutually beneficial relationships.”

Lessons learnt from NASP to create a representative industry in the USA, which can be applied to South Africa include:

  • Firms must do business with minorities and women, wherever they are found. The growth of minority firms depends on the clients with whom they do business, said Sims-Wilson.
  • Workforce diversity should be created, from entry to executive level. Governments should have a diversity programme with incentives for service providers.
  • Focus on clients. The actions of service providers are critical for the growth of a diverse investment industry. Service providers should respect their clients. The most successful service providers pay attention to the concerns of their clients.
  • Add diversity to the board of trustees, to ensure a fair representation of minorities.
  • Use investment for good corporate governance.
  • Address the racial and social justice requirements faced by participants (clients) and their beneficiaries.
  • Seek out a diverse pool of candidates for positions, this does not mandate an outcome, but only determines the process for a diverse set of candidates to be considered. The goal is not to let biases limit the pool of candidates or limit returns that could’ve been generated through a diverse workforce.
  • Trustees should request data from service providers that reports on the diversity of management and staff teams.  

Some of the delegates' reactions to the discussions on transformation at the summit:

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