This article was first published in the first-quarter 2015 edition of Personal Finance magazine.
“We’re the only company in South Africa that can enable its clients to do banking and investing locally and offshore under one brand,” Johan Greeff, the head of marketing at Investec, says.
It’s a bold claim, and one that is likely to induce scepticism in anyone who has tried to open a bank account abroad, let alone get a consolidated view of their assets scattered across institutions and time zones. But Investec is adamant that its new approach to servicing its clients, called One Place, is not some clever marketing ploy but makes life significantly easier for South Africans whose financial dealings straddle borders.
Investec, which is dual-listed in London and Johannesburg, has 171 000 high-income and high-net-worth clients around the world. It is the largest private client investment manager in South Africa and the third-largest in the United Kingdom.
The process of moving towards One Place started about 21 months ago, when the executive committees that run the banking and the investment sides of Investec sat down to discuss the degree of alignment between these two business units. Until then, each side of the company had worked separately, servicing clients independently of the other. But senior management realised that both units were, in fact, targeting the same clients, whose needs had, to a large extent, converged.
“It would have been remiss of us not to recognise these changes and continue to work in our silos,” Greeff says.
The One Place model required both legs of the business to work together to service a client’s financial needs. It also required aligning compliance and information technology in the offshore and local operations to offer South African clients a seamless banking and investment experience.
The context for the need to align banking and investment services is the increasing extent to which high-net-worth South Africans have become integrated into the global financial system since the government started to relax exchange controls over a decade ago. Today, individual South Africans can invest up to R4 million offshore per calendar year, plus they have an annual discretionary (travel) allowance of up to R1 million a year. For all intents and purposes, exchange controls have ceased to exist for all but the wealthiest individuals.
“The needs of private clients have changed significantly over the past five years with exchange controls being relaxed; they have needs as global citizens,” Greeff says.
Investec clients have been sending an “astronomical” amount of money abroad, mainly to the UK, which accounts for two-thirds of offshore investments, according to Greeff. Some of the transferring of money offshore has been driven by political factors, with South Africans hedging against risk in this country. But in many cases, wealthy clients are simply “living large”: they travel more, send their children to study overseas, invest in foreign businesses and property, or work or retire abroad.
The UK is a logical destination for South Africans wanting to venture offshore, thanks to the similar time zones and legal systems and the strong historical and cultural ties.
As wealthy South Africans have been externalising their assets, so Investec has been expanding internationally, particularly in the UK. In 2010, Investec bought up the remaining shares of Rensburg Sheppards, having bought a 47.7-percent stake in the investment management company in 2005. In 2011, it bought leading British financial services company the Evolution Group, which resulted in Investec acquiring venerable stockbroking and investment house Williams de Broë.
Greeff says that, without Investec’s substantial footprint in the UK, One Place would not have been possible. “Our competitors can offer some of what we do, but only through third-party arrangements,” he says.
One of the tangible results of One Place is that it is now much easier for South African clients to open a bank account in the UK. The strict regulatory environment in the UK means that it can take four to six months for non-residents to open an account. Investec held discussions with the banking authorities in the UK and South Africa and slashed the waiting period to four to six weeks; it hopes eventually to cut it down to a matter of days.
Investec’s UK Private Bank account costs £10 a month. It has a “deferred debit” card, so clients earn interest on card purchases until the next statement date, meaning that they can benefit from up to 30 days’ interest on money already spent. Other features include free international transfers, free ATM withdrawals even when clients are outside the UK, and a two-percent currency conversion fee on foreign card purchases and cash transactions. The card is couriered directly to South African clients at no cost.
Global clients want a consolidated view of their assets and transactions across institutions and jurisdictions, and Investec’s recently launched secure digital platform allows them to do just that. The platform can be accessed from a cellphone, a desktop computer or tablet.
The main advantage of the platform is that it can pull in information from all your accounts and investments, no matter where they are held, and generate a balance sheet of your assets and liabilities and an income statement of your transactions. Importing information from third-party institutions is simple; and you can input your privately held assets.
Once you have linked accounts to the platform, the values are constantly updated. The account and transaction information is shown in the currency of your choice.
The platform enables you to operate and manage your local and offshore accounts (current, credit card and money market) in most jurisdictions from a single “dashboard”. It also offers the full suite of banking services, including the ability to add beneficiaries and buy airtime.
It automatically sorts your spending into categories, such as groceries, but you can correct any errors and create your own categories. The results can be displayed graphically or as detailed financial statements, which can be exported as Excel files.
If you don’t want to transact online, or you need assistance, you can phone Investec’s 24-hour global call centre, which is staffed by graduates.
One Place does not mean that Investec has moved to a service model centred on a relationship manager, a “jack of all financial trades, but a master of none”. It does mean that Investec can provide clients with a 360-degree view of their finances and develop an integrated wealth management plan that takes account of all their assets.
“Our clients are sophisticated and need specialists in local and international banking and specialists in local and international investing,” Greeff says.
Your main point of contact with Investec may be as a bank client, but, as your needs change and your wealth grows, you will have access to specialists in other disciplines. For example, you may visit your private banker to discuss sending your child to study at Oxford. During the conversation, it emerges that you have surplus funds that should be invested in the UK to pay for your child’s education and living expenses. A specialist in UK investments can be brought in to discuss your options.
One Place does not offer fully integrated financial services – for example, it does not include estate planning. However, Greeff says that Investec can bring in external partners to provide fiduciary and trust services.
Even within the context of banking and investing, there is much to be done before complete alignment is achieved between South Africa and the UK. Whereas clients in South Africa have access to the full spectrum of banking services, asset finance and private capital, Investec needs to build its asset finance capability in the UK and make it more accessible, Greeff says. Currently, many of its products in the UK are suitable only for the very wealthy, he says.
Greeff says what One Place currently offers is just the start, and that more services and products need to be included. “What we have now is a seamless entry-level proposition,” he says.
For further information about offshore banking, read “Banking without borders” in the second-quarter 2014 edition of Personal Finance magazine.
* Investec was named the Best Private Bank and Wealth Manager in South Africa at the sixth annual Global Private Banking Awards held in Geneva in October 2014. The awards are hosted by Professional Wealth Management and The Banker magazines. Investec also won the award in 2013, when South African private banks were included in the survey for the first time.
DO YOU QUALIFY?
To bank with Investec, you need to earn at least R800 000 a year. To access the Wealth and Investment offering, the minimum investment amounts are as follows:
* Online stockbroking: R100 000
* Advisory stockbroker: R1 million
* Portfolio manager: R3 million
* Wealth manager: R20 million