NFB’s financial advisors are farmers but not in the traditional sense. These industry-leading experts provide independent financial advice, products and services to high worth individuals, trusts, businesses, and institutions and help them to grow and nurture their wealth.
South Africa’s financial services sector, and Africa’s more widely, is a constantly changing landscape which has presented huge opportunities for growth over the past 20+ years. Despite its ‘emerging market’ status, South Africa has a sophisticated financial sector and regulations governing the market, and particularly risk management, have undergone considerable refinement to align them to internationally recognised standards and best practice. The whole financial infrastructure has changed dramatically and today, the government calls the financial, real estate and business service sectors “pillars of the country’s economic growth over the years.”
Clearly, there is every reason to be positive if you operate in or around SA’s financial services sector and if you are an investor or financier where perhaps the bleak economic climate in the country right now is dampening your confidence, you can rest assured that South Africa has a large pool of very experienced experts who can offer you industry leading financial advice and guidance.
A leading example is Sandton-based NFB Financial Services Group. Formed more than 30 years ago, the business has been operating specifically in the provision of independent financial advice, products and services to high worth individuals, trusts, businesses, and institutions. The company is now one of the country’s leading broad spectrum financial services advisory businesses and holds an extremely strong position in the financial services market.
CEO and Founding partner, Mike Estment tells Enterprise Africa more about the formation of the company and its plans for development in the future.
“There were five of us,” he says. “I’m unfortunately the only remaining founder, and we started the business in April of 1985. The rationale behind it was the creation of something we owned as opposed to something we worked for. We were all into wealth management, we all came from banking backgrounds and we wanted to create something that had a long-term legacy and wealth creation opportunity for ourselves and others and it’s worked out rather well. We’re 31 years young and terribly excited about things.”
In the early years, NFB was a very different outfit compared to the current set up. There were five people in an office, with a small but important client base and today, the company has 150 highly skilled, highly educated employees and one of the country’s largest assets under management portfolios.
“We have more than 150 people employed around the country. The Sandton office contains around 50 people and the rest are in East London, Port Elizabeth and Cape Town,” explains Estment.
“NFB’s client base or assets under management is approximately R25 billion. Of that probably 23 would be individuals and their family trusts and less than 10% is what we would call institutional – such as pension funds and universities.
“We inherited clients because we had come out of different banking and investment backgrounds so there was a small degree of loyalty and client based build up but it was tiny compared to where we are today. We had to go and find new people, new products and new opportunities. In our early years, we were about yield and fixed interest and bond trading. In the late 80s/early 90s we graduated into broad spectrum financial advice which includes other forms of asset management, equity, assurance products, risk products and similar things.
“We had some very important clients that were significant in the success of the business because of the timing. Product-wise we have always been quite diverse. As soon as we became broad-spectrum investment managers, diversification was, has and will always remain a key tenet.”
BEATING ANY SLOWDOWN
Standard & Poor’s, Moody’s and Fitch – three of the most recognised international credit rating agencies – have all cast the SA economy in something of a negative light in recent times following the sharp downward revision of the country’s proposed GDP output and the Finance Minister debacle, but NFB’s business remains strong and despite the lack of confidence in the market and people’s increasing focus on looking after the pennies, Estment is confident with the strategy.
“There’s no question that South Africa is in a very tedious position economically and politically, yet NFB prospers for very good reasons,” he explains. “Firstly, we’ve created a business philosophy of ‘farming’; an analogy which means that you own the field, you fertilise it, if the rain comes it’s your fault and if it doesn’t come it’s also your fault; you own it and you don’t blame anyone if things don’t go right.
“Secondly, we have a high calibre client base with a high net worth aggregate and they’re less affected in their investment portfolios by the immediate short-term state of the economy and its upheavals.
“Thirdly, our business is very annuitized. It’s not about earning fancy sales commissions or hitting and running, it’s about the annuity income that portfolios will deliver as they prosper which will insulate NFB from inflationary risk and assures our income in the future.”
Another issue that has become an ongoing problem, running alongside the slow economic performance, is the depressed currency. In the past five years, and especially in recent months, the Rand has performed poorly against the US Dollar, British Pound and the Euro and this has added to the uncertainty in the economy. However, Estment doesn’t believe it’s all bad.
“The Rand has been, for the last 25 years, as volatile as hell. This is down to two things, the first is us being a resource-based economy. When China gets cold feet and realises it has overstocked itself and pulls back on inventory, you’ll have volatility in any emerging market, particularly the resource focussed markets. The second thing is political folly which is hard as it is totally unpredictable.
“The currency is vulnerable but it’s not always all bad news. When managed properly, a weak currency – within reason – can become globally attractive because it creates an environment in which export led industries can thrive.
“Is the currency going to bedevil every aspect and facet of the economy – no, but it has to be well managed.”
Importantly, in times like this, NFB can count on its most significant asset – its people – for effective strategy planning. The company describes its workforce as ‘a strong and talented team of experienced professionals committed to providing unparalleled levels of personalised service’. This is perhaps an understatement. With many years of experience between the management and wider employee network, NFB’s people are a credit to the industry. For this reason, the CEO is very confident when it comes to the future success of the business and the success of its clients.
“We have a really healthy mix of people in their mid to late-50s, fellows in their mid to late-40s and people like our MD, Andrew Duvenage in their mid-30s,” he says. “There’s a lot of succession and the younger people have a greater tendency to go and search new mandates whereas people like me have a strong reputation that I’ve nurtured and looked after which now feeds itself. I’ve got clients, who are high-worth, who will continue to introduce their friends to us because they feel there is good reason to.
“We’re not the sort of company that goes around knocking on doors. Our marketing is very good but it’s to an audience that we have identified for ourselves and not just a situation where we call 20 people, set up appointments and sell them whatever’s going – that’s not how we play. We are dependent on referrals and that helps to tailor our culture towards one where we provide quality service that assures us of those networks.”
NFB is happy to invest in its people and takes a slightly more modern approach to HR, which involves viewing staff as an asset to be nurtured rather than a cost to be stringently monitored and minimised.
“We wouldn’t want to compete with high sales oriented life assurance brokers. We look for quality; people who are prepared to ‘farm’ alongside us. We bring in young talent and pay for their education, we encourage that side of it as we want people who are plausible, intelligent and not in a hurry,” says Estment.
The company was even happy to sponsor and support Andrew Duvenage’s efforts in the 2016 Cape Epic, an annual mountain bike stage race held in the Western Cape that typically covers more than 700 kilometres (435 miles), and lasts eight days. This shows that NFB encourages both personal and professional development, making for an invigorated mind-set when it comes to customer service.
And the company will have to utilise all of the expertise at its disposal to continue growing in the aforementioned tedious economic situation. Estment details some of the challenges facing the company but says NFB is fully prepared. “The team that we have built over the last 20 years is very capable.
“We’re in a preferred position relative to mining or traditional industrial labour-intense businesses but we’re challenged by our own set of realities which include burgeoning regulations, examination, qualification, capital adequacy requirements and all sorts of things which are being added to the game. Fortunately this suits NFB down to the ground but it does create a hurdle or a barrier to entry,” he says.
FUTURE GROWTH
Both Estment as CEO and Duvenage as MD are obviously keen to see NFB grow in the future, in terms of relationships with current clients, numbers of new clients, types of client, number of employees and assets under management.
The MD tells us that business is ‘buoyant’ and Estment explains that growth will come in the form of acquisition.
“For many years I’ve been wanting to merge or acquire other advisories into NFB as we have fantastic systems and services but there’s been a resistance to that as the advisors were doing very well in a rather unregulated environment. Now, with the regulation being pushed on them, they are revisiting the whole rational for being in the business and that suits us as they’ll become more open to merging or they’ll leave, and both of these scenarios result in opportunity for us.
“We are part of a listed entity and we will be looking for other advisories that can identify with NFB’s culture and proposition and be added to the portfolio so that we can gain from that,” he says.
NFB will also be accelerating its marketing push in an effort to broaden the spectrum of assets under management and grow its share of the market with ‘institutional money’.
“NFB will continue developing its strengths and in addition we have an online agenda which includes robo-advice that’s going live right now,” explains Estment. “It’s early days but we are excited about the outcome with that. We are also looking at marketing through the media, particularly with online stuff, and we want to increase our footprint in the non-individual wealth management space – that’s the institutional money.”
With this strategy, which is focused around continual development, NFB looks set to grow further in 2016. This is not a company living on the edge in an industry that is in trouble; this is a business that is well positioned, pushing off a strong base and offering unparalleled service and expertise.
Estment and Duvenage are right to be confident about the future and the CEO concludes by telling us that customer service will always remain paramount: “Our clients have direct and personal relationships with our advisors and support staff. We know our clients’ wealth plan and we know how it has evolved over time, and continues to evolve.
“We use the scale of the NFB Group and the quality of our business relationships to ensure that our clients get an outcome that they might otherwise not have.
“Everything we do is focused on making our clients happy and keeping them with us for the long term.”