The South African financial services industry is selling you fairy tales: CEO

A finance CEO has questioned the complicated jargon in the asset management industry in South Africa which, she says, clouds the real cost of investing.

In an interview with CapeTalk’s Kieno Kammies, Magda Wierzycka, CEO of the Sygnia Group, said that the level of financial literacy in the country is very low, and that the financial services industry in South Africa spends enormous amounts of money “making sure (financial) literacy is kept at a very low level.”

The former Coronation employee, said: “The amount of jargon that is used, the amount of emotive advertising to make you believe fairy tales is enormous.”

Wierzycka said that the asset management industry spends billions annually on rewarding its employees in bonuses. “That’s not an industry that’s creating jobs, it’s certainly an industry that is very well known for rewarding itself well,” she told CapeTalk.

The chief executive said that the money comes from the savings of the average South African – in fees and charges. She said that some of it is disclosed and some is undisclosed, but in such a complicated manner that you have no idea of how much you are really paying.

Wierzycka said complicated jargon applies to individual savings, unit trusts, retirement annuities and other investment vehicles used by many South Africans looking towards their future.

“People spend more time researching a refrigerator, a washing machine, a car than a retirement saving,” Wierzycka said, adding that many large companies exist purely by taking fees, while agents’ interests are not aligned with the people who’s money they taking to invest.

A poll of 30 countries and economies published in October last year – drawn from Africa, Asia, Europe, Australasia, North America and South America – showed that South Africa was last when measuring financial knowledge.

According to the the Organisation for Economic Co-operation and Development (OECD), adults in many countries around the world display low levels of financial knowledge, fail to engage in financial behaviours that could improve their financial security, and have financial attitudes oriented towards the short-term.

The OECD/INFE International Survey of Adult Financial Literacy Competencies questioned 50,000 people including 2,813 South Africans aged between 18 and 79.

It found that average levels of financial knowledge show room for improvement. On average, just 56% of adults across participating countries and economies achieved a score of at least five out of seven, considered to be the minimum target score.

South Africa was at the bottom of the list, scoring around 30%.

Read: South Africa comes last in global financial literacy poll

Latest news

Partner Content

Show comments

Follow us