Discovery mulls wealth brokerage
• Unit would link group’s banking platform and investment arm to provide customers with financial planning advice
Discovery Invest CEO Kenny Rabson says the insurance group is weighing the feasibility of establishing a unit that would act as a link between its rapidly growing banking platform and its investment arm to provide financial planning to customers.
Discovery Invest CEO Kenny Rabson says the insurance group is considering the feasibility of a unit to act as a link between its rapidly growing banking platform and its investment arm to provide financial planning advice to customers.
Even so, Discovery Invest will not seek to take away business from independent financial advisers or tied agents who already advise clients making use of its investment products.
“There is potential opportunity in having wealth managers together with the bank — all banks have got wealth brokers who write investments — we think that’s a huge opportunity going forward,” Rabson told Business Day in an interview.
“Think of it as a brokerage with those brokers servicing clients through the bank where they’re not existing clients of our agents or brokers that support us. We’re not going to set up a broker to take away clients from agents who support us. We will never disintermediate anyone.”
Discovery Invest assets under administration rose 11% to R107bn in the six months to endDecember 2020, though net inflows dropped 5% to R2.8bn and new business fell 3% to R1.32bn. Operating profit fell 3% to R471m in the interim period.
Discovery Invest is still banking on the shared value model of its parent’s flagship Vitality programme, to draw new clients to its investment platform. That will hinge on its ability to cross-sell the investment platform to existing Discovery Health, Discovery Insure and Discovery Bank clients as well as potential new clients with no existing exposure to the broader group’s products.
“The bank is introducing clients to the Discovery Group that don’t necessarily have any of our other products,” said Rabson. “Banking and investment are quite closely aligned, so we see a huge opportunity there.”
Discovery Bank targets 500 new clients a day and runs at that capacity now, said Rabson. Discovery Invest plans to onboard 17%-20% of those new clients, “if not more”, he said.
“What we believe we bring to the market is a totally different outcome for our clients,” said Rabson. Discovery Invest’s “boost” incentive scheme is a unique offering locally.
Discovery Invest has about 6.2% of the Discovery Health Medical Scheme members as clients, 18% of Discovery Insure vehicle insurance clients and 16% of Discovery Bank clients. Though the company does not conduct the asset management function it has its own Discovery-branded local unit trusts, managed by Ninety One. The only exception is its global property fund, overseen by Fairtree, while Discovery’s global platform is underpinned by BlackRock and Goldman Sachs Asset Management.
While Rabson said Discovery Invest would not seek to take clients from independent financial advisers or tied agents who support its business, it would regard brokers using other platforms who do not provide it with business as “fair game”. He said the group was reviewing whether to continue offering the investment products of rival firms on its platform that do not allow Discovery Invest products to be listed on their own investment platforms.
“Obviously we don’t want to be marketing funds for other companies on our platform if they’re not going to market ours on theirs,” said Rabson. “We’ve got a very strong tied agency force that has brought us a lot of business in the past.”