Alexander Forbes is buying one of Sanlam’s businesses in a transaction that will increase its client base by 40%.
The country’s largest pension funds administrator announced on Monday that it has concluded two agreements with Sanlam. One is to buy Sanlam’s large standalone employee benefits (EB) retirement fund administration business, a business that Alexander Forbes CEO Dawie de Villiers led for years before leaving Sanlam.
The second transaction will see Alexander Forbes sell its Individual Client Administration business to Glacier by Sanlam for R200 million. But De Villiers said Alexander Forbes will still own the clients whose monies will now be managed by Glacier. It will also still get the inflows of the money that Glacier will invest to Alexander Forbes’ funds.
“So, we remain their advisers. We supply the investment products on that platform. We are actually growing that part of the business,” said De Villiers.
Alexander Forbes has been trimming down its business since De Villiers moved over from Sanlam to focus on its core business of retirement administration. As part of that, it has sold its short-term insurance business to Momentum Metropolitan Holdings and its life insurance business to Sanlam.
De Villiers said the latest sale of the Individual Client Administration business happened because Alexander Forbes needs a better Linked Investment Service Provider (LISP) platform than its current one.
A LISP platform helps companies like Alexander Forbes and Glacier to offer investors unit trust investments to customers. While Alexander Forbes built its first LISP years ago, it hasn’t invested enough in it to make it competitive.
“We are behind Ninety One, Glacier and Alan Gray. But this is our growth area, and the quickest way to get there is to just place our members on Glacier. It’s the admin, the back-office admin and that we are going to run through Glacier now,” explained De Villiers.
He said Alexander Forbes people would work there, and its products will remain in place.
De Villiers’ history with Sanlam and all the recent deals with the insurer might make some people scrutinise his moves. But the CEO said Alexander Forbes tested the market in great lengths, and Glacier came out on top.
“Ninety One is focused on Ninety One products. Allan Gray is focused on its own products. On the other hand, Glacier is an open-source platform. It was by far the best in the market for us,” he said.
De Villiers said buying the Sanlam standalone EB retirement fund administration business will add about 340 000 members to Alexander Forbes’ client base.
Employee benefit administration businesses like Alexander Forbes bore the brunt of Covid-19-related retrenchments in the past 20 months. And the pandemic came at a time when retirement administrators were losing clients anyway due to the stagnant economy that wasn’t supporting employment growth.
Alexander Forbes, which had more than 1.1 million members under administration at some point, saw that shrink to just under 900 000. And it was thanks to winning new business from retirement funds, healthcare, investments and individual consulting segment that its member base didn’t fall too much.
The group achieved new business wins of R82 million in annualised revenue in the six months to 30 September. The group’s assets under management and administration increased by 20% year on year to R423 billion.
With almost 900 000 members on its books already, the Sanlam deal will push that client base to about 1.3 million members. De Villiers said Alexander Forbes is still on-boarding some clients it recently won. So, there’s more to come in terms of membership growth.-fin24