Challenging financial services sector to rethink investment model

As featured in Financial Mail and Business LIVE.

Founder and MD of 27four Investment Managers Fatima Vawda sees the Covid- 19 pandemic as a chance for financial services organisations to change how they operate for the social good of all South Africans. It’s the same need to do things differently that compelled her to start her own company in 2008.

“I worked in the corporate sector for about 12 years before I started 27four Investment Managers. I was tired of being told that ‘this is how it’s always been done’ and that change is bad,” she says. “There were huge challenges in our sector and the only way I could make a change was to start my own business and do things my way.”

And her way paid off. Twelve years later, 27four is a strong diversified financial services group with a difference: it listens to people and designs products and services that meet their specific needs. “The time was right to bring something to market that people wanted. Our industry has a long-standing reputation for putting products forward without understanding the consumer,” says Vawda.

Investing in the time of Covid-19

Vawda says the financial services sector needs to rise up and help protect society and our economy. “Covid-19 has really exposed the weaknesses and shortcomings of the global economy,” she says. “We have a real opportunity now to think about what our sector is doing to alleviate the pressures, burdens and consequences of Covid-19.”

For her, safeguarding small and midsized enterprises is critical right now. “There are good investment opportunities in unlisted businesses that could generate a return for savers and benefit the economy — but regulations prevent investors from investing in certain sectors. Why aren’t we talking about changing regulations?” Here, Vawda refers to pension fund regulation 28, which restricts the amount of capital you can invest in assets not listed on an exchange, and unit trust regulations, which do not permit investment in unlisted companies.

“When there’s a crisis, markets fall and savers lose a lot of money in unit trusts. Then, you need to buy their confidence to come back into this market again,” she says. “But there are good-quality businesses that can generate strong earnings, protect consumers from capital losses, and deliver good long-term investment returns if regulation allowed it.”

Investing for social good

Vawda challenges the financial services industry to see investment as a way to improve society. “Now is an opportune time to think about how our savings and investment industry can help to achieve the UN’s sustainable development goals,” she says.

“We’re talking about more than R6-trillion of savings that we can invest with good social outcomes, such as affordable housing, health care and infrastructure, without compromising investment returns — and in fact protecting investment returns.”

Vawda says to survive Covid-19, the financial services sector will have to:

change the way it speaks to consumers to prevent the perception that companies only care about making money;
prioritise the digitisation of the sector; and
change the way it saves and invests.

“Client servicing and communication is most important during this period,” she says.

“At 27four, we’re constantly reaching out to people to show that the trust bond between us and them still exists.”

“We’ve always embraced fintech, so transitioning from a traditional environment into a fintech environment was quite easy,” Vawda says. “We’ve had zero disruption because our business continuity plan is solid. We’re careful to stay healthy, protect our people and support small business while they get out of this. It’s not always about money.”

“I’ve been appointed as an ambassador for the Giving for Hope Foundation which has raised R100m to help small businesses survive during this time,” she says.

Vawda explains how financial services can help alleviate the pressures of Covid-19.

“President Cyril Ramaphosa has come forward with R500bn of relief — and we can help drive change by looking at our regulations, the collective investment schemes industry, and finding ways to generate investment opportunities that can benefit savers, protect capital and make a contribution to the economy.”