The external environment which our industry requires if it is to achieve solid growth, consists of a positive equity market, a stable, expanding economic environment and a growing labour force. Not all these factors have worked in our favour in the past year, requiring unprecedented resolve and innovative approaches to deliver on our double-digit growth commitment, without compromising our long-term vision to create a great company.
We (and our clients) have gained from the South African bull market which has trended for the past six years but, as the chairman makes clear in his message, other factors largely beyond our control have been less favourable. Specifically, the labour market has been flat and even contracting and the disposable income of the formally employed minority has been squeezed and drained on many fronts. That we have gained market share under such formidably challenging conditions speaks to the wisdom of the investments we keep making in our strengths, in our reputation and in our employees.
PROVIDING SERVICES WITH REAL IMPACT
As much as we created value for shareholders this year we kept our promises to our clients; in the second half of the year 71% of Investment Solutions' funds performed ahead of benchmark and our performance on assets under management was generally very satisfactory.
Most pleasingly, customer satisfaction rates continued to improve. Receiving prestigious accolades such as the PMR diamond arrow award for the best consulting and actuarial business and the highest rated pension fund administrator award, both for the eighth consecutive year, speaks of our commitment to being the very best at what we do best. Awards and customer service scores are important measures of our success – they tell us how embedded is our culture of always treating the customer fairly and of consistently serving them with positive impact. I believe I can confidently say that in the year reviewed we further entrenched our SERVE culture across Alexander Forbes.
This year we invested large sums in improving our core offering to both institutional and retail customers, in developing and marketing exceptional new value propositions. We invested similarly large amounts of money, time and effort in improving our IT platforms and in a new employee value proposition. In the immediate future we intend working harder than ever to build our brand and to communicate our key strengths and the impact our services can have as well as deepening our investment into reaching our target markets with our extended value proposition and refreshed IT platforms.
A NEW STRATEGIC INTENT
After a year of sustained improvement and growth, in April 2015 we embarked on a new five-year strategic course, one that renews our commitment to our SERVE ethos and to our higher purpose. This new course will enable Alexander Forbes to exploit its tremendous potential and its many strengths, to become a truly great company by 2020. Our ambition statement is to be a company producing an annual operating profit of R2 020 million and one that creates value for each of its key stakeholder groups – clients, employees, society and investors.
The more we achieve well-being for our employees the better equipped they will be to achieve financial well-being for their clients and members. Well-being for our clients, in turn, will translate into greater financial well-being for investors which, as we have seen this year, allows us to increase the positive contribution we make towards society. To give concrete expression to this ambition by early 2015 we had identified and trained 22 financial well-being consultants, a new breed of all-round experts whose work will support our quest to move beyond products to providing meaningful financial wellness. We also prepared to roll out an extensive well-being workplace programme, to make sure that our people enjoy the kind of financial peace of mind we seek to give our clients and members.
Our new five-year strategic intent (which we unpack here) is being implemented in an environment of exponential, unprecedented and often quite daunting change. In 2014/15, we laid the basis for a culture of high innovation where our aim is to seek ongoing opportunities for incremental improvement whilst future-proofing ourselves to leapfrog towards a more robust and competitive business model.
Our group-wide innovation campaign this past year yielded an extremely positive response. Some 573 ideas were submitted to our new innovation hub and 16 business cases received by divisional executive committees. By year-end five innovations had been implemented and 12 robust business cases pitched at our first ever ‘Innovation Den' held in May 2015. In the new year I intend spending a significant amount of time personally heading up our new drive to innovate, disrupt and to reinvent ourselves.
A NEW STRATEGICALLY ALIGNED STRUCTURE
We believe that structure follows strategy and so, following the board's endorsement of our new strategic intent in February 2015, we restructured our business along cluster lines to better support the realisation of our ambition to create a truly great company by 2020.
We have been in the fortunate position of retaining a highly skilled, experienced and stable leadership core which is, as I write, working to realise the new future of Alexander Forbes.
Our clusters (see here) give expression to our strategic intent. They also speak to our key strengths and will translate into more optimal use of operations and resources which, traditionally, have been silo'd. This, we have no doubt, will mean better cost control – a more focused, more fit-for-purpose Alexander Forbes.
In driving our new strategic direction, we seek to exploit opportunities and to embrace a number of key challenges. These challenges include hiring, retaining and engaging excellent people and constantly enhancing our business model to give a client experience that is engaging, effortless, consistent, remarkable and rewarding.
We will work hard to maximise technology to remain agile and to be able to seamlessly manage an influx of new clients (particularly individuals) and seek higher levels of operational gearing. The quality of our leadership will be tested by the extent to which we bring fanatical discipline to bear on executing our strategic intent and engender productive paranoia that ensures we plan effectively for the future – all while practising empirical creativity to underpin our innovation and next-generation products, services and delivery models.
The rate of change continues to growth exponentially. Great companies will be those that approach disruption not as a threat but as a very real opportunity – an opportunity to constantly reinvent themselves through discipline and disruptive thinking. In 2015, Alexander Forbes is, I believe, such an organisation.
In closing I thank my executive teams and all employees – in South Africa, elsewhere in Africa and in Europe – for their extremely hard work in a most demanding year. I also extend my sincere appreciation to our chairman, Mr Sello Moloko, and the board for their unstinting support in guiding our group so skilfully through the many challenges encountered and embraced.
We have in place a first-class executive team that is uniquely equipped to build a great company by 2020, to create positive impacts for all stakeholders while giving people peace of mind through securing their financial well-being, now and in the future.
Group chief executive
30 June 2015