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

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

BusinessTech's Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as they receive it. They are believed to be cl...
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  • Riaan

    Wow! Very true and well said by Wierzycka. Indeed; people spend more time researching their next cell phone upgrade than their investment decisions.

    Institutions get their +-1% on your capital every year regardless if it grows or shrinks – something I could never make peace with.

  • Cosmic Bob

    So how do we fix this?

    • Buy Sygnia Group products duh, advertorial.

      • Cosmic Bob

        lol, good point

    • Runnin Bare

      Hope Mybb comes up with an answer on Monday.

  • Seriously?

    Maybe this is a place where the government can step-in and investigate as I’m sure that they can “cap” charges and commissions.

  • the-TRUTH

    Interestingly, I have decided to surrender all my investments done through financial service providers and I’m gonna use the loot I receive to reinvest it into my own self-made investment account…
    It’s time I take my future into my hands and not third parties

    • john speck

      Can you imagine what your pension payout is scewed by the companies paying it out.They are a god unto themselves and do what they like pay what they like.I just had cause to investigate a pension payout.It didnt look right so I submitted it to the Pension Funds Adjudicater and yesterday the pension was trebbled suddenly…..We made a mistake. Dont believe the excuse ,there doesnt seem to be control in this financial area of big money payouts.Try and keep track of what you paying into the pension fund.

  • dainfern

    This is nothing but a self-serving article by little old Magda. Try and understand the fees Sygnia charges on their hedge funds—it will make your head spin.
    In the US I can buy index funds for as little as 0,19% per annum. Sygnia charges at least 0,40% for the same product.
    Careful Magda–you are living in a glass house and you know what happens if you throw stones!

    • Frank Payne

      Whatever one thinks about her article, one thing is certain; the jargon surrounding the majority of financial products in the market, banking, insurance, medical aid, investment and others, are swamped by obfuscation, secrecy, exploitation and heaven knows what more, to the point that participants in the plethora of products tossed about, have no clue as to what they are buying. So called “advisors” are generally more interested in earnings maximization, than in the welfare of their clients’ needs. Financial institutions are now purveyors of any and all types of product they can lay their hands on and have become masters of none. Sure they make huge profits, which are used to enrich their corporations, whilst contributors are levied huge contributions which produce mediocre results. Fees are effectively hidden from view, so that the true costs to clients are seldom evident. One has only to witness the obscene monuments to excess, that banks, insurance companies and other financial service organisations have erected at contributors expense, to realise the extent to which wealth transfer has taken place. The business model is jealously guarded and is a classic example of how to massively accumulate capital in real assets at present day monetary values, for their own corporate benefit, whilst payments for obligations are due in some cases decades later, and are settled in depreciated money, ravaged by inflation, increasingly costly premiums and service costs. It is a licence to print money and it is not difficult to see who the major beneficiaries are.

    • Demisemi

      Dainfern, regardless of what fees Sygnia charge, if they at least made you aware of it, then you have a choice.

      At least Magda is one of the few calling the industry out on the HIDDEN fees.

      And for this, she is lauded.

      • dainfern

        Which hidden fees are you talking about. All fees now have to be declared to investors…so not sure what you are harping on about. This might have been the case 10 years and more ago but everything is now declared.

    • OWL

      So there is no substance to what she is saying?
      I took OM on, got my money back. The entire industry is a bunch of charlatans, and she is 100% correct, you are all selling BS to enrich yourselves.

  • Brian

    I have had two policies with Old Mutual for many years. A few years back I discovered that I am paying fees to an agent who did not sell me the policies and nor does he offer me any advice on the policies. They just started forcing me to pay commission to him. I have sent a number of emails to them asking why because this money should be reinvested into my policy rather than pay an agent who has nothing to do with it. Their reply? Nothing. I cant get them to stop paying him which affects the value of my fund.

    • brz

      Maybe you should investigate whether you can stop the policies and invest the proceeds in a more profitable way. Many of the older policies were in fact bad investment of one’s money.

      • Brian

        Yes, thanks. I must take the time to investigate that.

  • IshTeva

    The thing is, you are still far better off investing than not investing. What do these clowns suggest as an alternative? Stuff cash in a matress?

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