Chief Financial Officer: Astute Group
‘There are up to 20 000 financial advisors in the country, it’s much easier for them to go on our platform and pull information than to phone different investment houses.’
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CIARAN RYAN: This is CFO Talks and today we’re very happy to have Ovadia Kaempf, who is the lead finance craftsman at the Astute Group, that’s an industry-owned fintech company, which we are going to find out a little bit more about in a minute. He heads up the finance team there and manages all the financial aspects of the group, ensuring the growth, sustainability, reference and governance related to the group. Astute utilises Agile and Lean methodologies, and we need to find out what those are, and we’re going to do that in a minute. Welcome, Ovadia.
OVADIA KAEMPF:Thank you very much.
CIARAN RYAN: Just to kickoff, tell us a little bit about the Astute Group, it’s a fintech company, there are a lot of fintechs starting up these days, clearly you have a fairly clear vision of what you want to do with the business, can you explain that?
OVADIA KAEMPF: Sure, so it’s not a fintech company in that it’s not a startup. Astute has been around for about 20 years, it started off with some competitors in the life insurance industry, being Liberty, Old Mutual and Sanlam that got together and said let’s make a shared platform where we can share information that will benefit our financial advisors. So what came out after a few years was that they created an IT platform that allowed financial advisors to source life insurance information, whether it be one company or another. So that has now become quite big, it’s got virtually all the life insurance companies in South Africa. So, for example, if we were to put in your ID we’d be able to pull out whatever life insurance policies you’ve got from whatever company. So obviously we can’t do that because it’s very strictly controlled, it has to be done with your consent but that’s how Astute started. From there and because they created this common platform, we were really industry managed and we weren’t a company that was working for its shareholders as such but rather for the industry. Other industry players came in and there were other needs in the market. So if I just stay on the main product that it started with, which helps the financial advisors, we’ve expanded on that over the years. So just in the past year or two we’ve added investment information. What we’ve found is, let’s say if a person has got R1000 a month to invest, they can decide if they want to take out a life insurance policy or to invest or a provident fund or whatever, we were very much leaning towards the life insurance choices that people were making. So we said let’s open that up and get investment companies on board, which we’re in the process of doing. Typically, in South Africa if you get a few of the big companies, in our case we’re looking at six or seven, you’ve got the bulk of the market because the players are big. The other place where we are starting to expand that product is on the employee benefits side, which means if you take a person and you try to get whatever savings information they’ve got or policies they’ve got, a lot of their savings could be in a provident fund or pension fund. So we’re talking to the same partners who partner with us in the life insurance industry to open up access to that. So, once again, if you have a financial advisor he or she will come to you and say give me permission to look up your information, we’ll pull all that information and have it on one piece of paper, and then that financial advisor is equipped to give a lot of help to that person.
CIARAN RYAN: It sounds like it’s a fairly clever and obvious use of technology, where you have access to companies’ databases in the space that you’re operating in. Almost like the Uber of the financial sector, in a way.
OVADIA KAEMPF: Yes and it comes with a lot of responsibility as well.
Astute’s unique offering
CIARAN RYAN: That’s right because of the PoPI Act, the Protection of Personal Information Act, so you have to be very careful about how you guard that information and look after that information. From a technology point of view, I understand what’s happening, then what is the unique offering that you have?
OVADIA KAEMPF: So that’s the one offering we have and basically most financial advisors have got an account with us, there are up to 20 000 financial advisors in the country, it’s much easier for them to go on our platform and pull information than to phone different investment houses. From there we have developed other products as well, we also work very much in the risk space, which is away from that and we assist companies with risk exposure. So, for example, we have a product where, once again, the big life houses share information, very properly controlled and very well done, that if a person, for example, applies for life insurance and they fill out an application form and they say they have never had any disease or claims or whatever, that goes into a database where the other life insurers can check to see if that is indeed true. So if someone had a claim a year ago where they had cancer and now they have applied for another life insurance policy, they will pick it up. So risk mitigation prevents fraud because it’s a fraudulent act if a person fills out a form incorrectly, and it’s very valuable for our clients.
CIARAN RYAN: So your clients are who, they are the financial advisors, the 20 000 financial advisors?
OVADIA KAEMPF: No, our clients are really two-pronged, our clients are the financial advisors in terms of the individuals but our clients are also the corporates who provide the products, so in that case the clients aren’t the financial advisors, they’re actually the underwriters and the corporates who are actually taking the risk in life insurance policies and they want to know what their risk exposure is and if there is fraud in that as well.
CIARAN RYAN: Is your database available to pretty much anybody?
OVADIA KAEMPF: Absolutely not, it’s closed, it’s controlled, it’s very, very controlled. You can’t play with data; the data is used particularly to pick up fraud and nothing else.
CIARAN RYAN: Give us an idea of the growth of the group if you can?
OVADIA KAEMPF: I started in 2013 and we have more than doubled in size but being an IT company, the amount of people doesn’t reflect the footprint…
CIARAN RYAN: You’re talking about the number of employees now?
OVADIA KAEMPF: Yes.
‘We are not driven by profits’
CIARAN RYAN: So what about in terms of revenue and profits?
OVADIA KAEMPF: Revenue, we have more than doubled, a lot more than double because we are industry-managed we are not driven by profits, so it’s not a fair measure on us, so our mandate…
CIARAN RYAN: Sorry, just explain that, not driven by profits.
OVADIA KAEMPF: Our mandate is to be sustainable; we obviously have to be cash positive and generate a reasonable profit every year but to push the profits and increase prices to our clients is not…because our clients are really our partners. We’d rather spend money on developing other service offerings than make super profits.
CIARAN RYAN: So what are your key performance indicators if profit is not one of them?
OVADIA KAEMPF: Growth is one, having a bigger footprint in the market because, remember, it costs a lot of money to start new products and to build new offerings. So we are driven to be sustainable but at the same time to be developing in the fields that we are developing.
CIARAN RYAN: Because you’re partnering with the big life companies and the big insurance companies, is that it?
OVADIA KAEMPF: Pretty much, yes.
CIARAN RYAN: So they don’t want to see you profiting at their expense?
OVADIA KAEMPF: Absolutely, they haven’t invested in us to make a profit, they’ve invested in us to…it’s quite a mature situation because it’s all competitors getting together and saying you create a common platform, which we are not dictating to how to do it because you manage it as industry and share information. When there are needs in the market, then we supply those needs, one of the new products we’ve got is a product called verification of personal information, which we partner with the Department of Home Affairs, and we have clients, once again, corporates, who check ID numbers against the DHA database but at a very fast rate. They can check lineage, they can check children, they can check marriage, they can check death. It’s remarkable the amount of fraud that goes on in that space.
CIARAN RYAN: Just talk about that for a minute, are you seeing trends there in terms of fraud, is it identity theft?
OVADIA KAEMPF: I’m not an expert in this but in a nutshell if, let’s say, you’ve got 1000 claims, there’s a good chance that a few of those will be claims on someone who is actually technically dead already and the claim is coming from someone who actually doesn’t live anymore but the systems in place can’t actually pick up that the person is dead, or there could be a claim that there’s an insurance policy where the person has three children but actually they haven’t got three children, they’ve got no children. It’s a risk mitigation.
CIARAN RYAN: Is it becoming a big problem these days, this kind of fraud because I guess wherever money is…
OVADIA KAEMPF: I think these things are a reality in the market, I think the companies work very hard to mitigate because at the end of the day, the end consumer pays for it because they are having to up prices to cover for fraudulent activity. So if they make, let’s say, ten payouts of a couple of million rand each and they shouldn’t have made that because it was fraud, that’s going to cost the community at the end of the day.
CIARAN RYAN: So you’re able to crosscheck that against the Department of Home Affairs database to see whether the person is alive, does have three children, is not deceased and, therefore, whether this policy should be paid out or not.
OVADIA KAEMPF: Yes and also there are some companies that say if a person passes away, the family can get paid out within a few days. We allow that to happen because we can verify it at a fairly fast rate, without that happening it’s a challenge.
CIARAN RYAN: So it’s very difficult to trick your systems because you have this ability to crosscheck…
OVADIA KAEMPF: Well, we’re going to the source.
CIARAN RYAN: Tell us a little bit about yourself and how you ended up where you are today, you call yourself the lead finance craftsman, I have never heard that word before, explain that for us.
OVADIA KAEMPF:That comes from a strategic break, I am the CFO, but it’s very interesting in the accounting profession how things have changed.
CIARAN RYAN: You don’t come from an accounting academic background?
OVADIA KAEMPF: No, I don’t.
CIARAN RYAN: That’s also interesting, explain that.
OVADIA KAEMPF: Basically, I think account was built for tangible things and we live very much in an intangible world now and you see it more and more coming up. It’s quite fascinating because accountants do grapple with intangibles, it’s like a really difficult thing. If you look at the valuation of companies now a lot of them are based on intangibles, not tangibles. Basically, we are all craftsman of the things that we do, and I deal in finance, so I don’t want to think for a moment that we compromise on any IFRS compliance and all the compliance that one has to do as a CFO but we also have to take cognizance of the changing world. You were asking about Agile…
Agile and Lean methodologies
CIARAN RYAN: Yes, the Agile and the Lean methodologies, what are those?
OVADIA KAEMPF: So if I can just elaborate on that a bit, the struggle we have today is how to…the old cost accounting days, where you could have a factory floor and you could work out the cost of goods and things like that, it doesn’t work so well in a world where you have a whole lot of people sitting at computers, it’s very difficult to tell what they’re doing, we try the classic way of trying to do it, which is by timekeeping. I don’t know if you know that it was started by a lawyer in 1943, he was struggling with the concept of charging out time, so he started keeping time, so charged per hour.
CIARAN RYAN: It should be a fairly obvious thing to do but okay.
OVADIA KAEMPF: Yes, so charge this client for two hours and that client for one hour and we are still in that headspace but actually in the IT world they have moved on, Agile and things like that, because it’s very difficult to measure in time the output of groups of people or of one person. So Agile basically groups people together and says that team have got a task to do and you have a whole line of progression, so the task may be to generate some revenue by building something and then you can actually measure that task against the revenue that is supposed to perform, and that is probably a more accurate measure of the output of the team members, rather than asking them to keep your time. We are in that journey, we still do timekeeping but it doesn’t do so well because you can’t get everyone’s time all the time accurately, there’s a classic problem in timekeeping of what level of accuracy can a person have. It’s very hard for any of us to say what we did the whole day.
CIARAN RYAN: Exactly and I think a lot of companies are battling with this question that you can clock up the hours, as happens with consultants and lawyers and accountants, they charge mostly in hours but what is the product?
OVADIA KAEMPF: Exactly, so Agile is in response to this and, interestingly enough, it comes from pure manufacturing, I don’t know if you’re familiar with the Kanban?
CIARAN RYAN: No, what is that?
OVADIA KAEMPF: The Japanese just-in-time thinking, where they would produce cars just-in-time, they wouldn’t sit on stock. So Agile comes from that, so they basically say don’t have a lot of stock on hand, and now, remember, stock is intangible, build for purpose and know what you are going to build.
CIARAN RYAN: Stock is intangible in your line of work, not if you’re manufacturing cars.
OVADIA KAEMPF: That’s right but it’s always easier when you explain it, to explain tangible things because otherwise it becomes very hard to understand, and you do have such a thing as stock in the intangible IT building, you have a whole lot of people working on half-finished, three-quarter finished [projects], not sure what the client wants and so on. So to close all of that have very focused purpose-driven teams and then you say that that cost of that team is XYZ and that’s how you can measure it. So I think Agile is not easy but I think it’s a good response to where we are in the IT world because things are more and more IT-driven and that’s what we try to do on our side, to look at things in that way as much as possible. But it really is a journey, it’s not an easy process.
From movie script writer to CFO
CIARAN RYAN: Tell us a little bit about yourself, where you grew up, where you were educated and your career path.
OVADIA KAEMPF: I grew up in Cape Town in a fairly big family, I had three siblings, and after Cape Town I went to live in London for a few years. There, interestingly enough, I wrote scripts, I was very involved in the movie industry. So I wrote scripts, I made a few little movies and after a few years I decided this is not for me, I think it’s a very different world.
CIARAN RYAN: A lot of accountants would say they would go the other way, they would say they’d rather be in script writing. Anyway, carry on.
OVADIA KAEMPF: That was one of the journeys that I made that was a bit different. When I came back to South Africa I worked for my father, who’s a leading expert in contractual issues, so I worked with him for a while, which was very, very interesting but it wasn’t something that I wanted to do for the rest of my career. I then got two degrees, I got a BCom and a BCom Honours, and I went to work as a financial manager at a small investment company. I really enjoyed it, I like the numbers, I liked analysing trends and things like that. So from there I went from that job to another retail company and then I went to ADvTECH, which was a great experience.
CIARAN RYAN: ADvTECH is very big today in education and schooling.
OVADIA KAEMPF: What I found out when I went to ADvTECH, the reason I went was because at that stage they had – it was quite a long time ago, about 15 years ago or more – they had acquired a whole lot of companies and everything was disparate, everything was all mixed up. In the entrepreneurial companies the systems were different, the books were different, everything was quite upside down. So they needed to bring some order and some consistency across the board with all the acquisitions they made. I found that work very interesting and I found that I was very good at fixing up things and clearing up legacy issues in the accounting world and that’s where one of my biggest strengths is.
CIARAN RYAN: Cleaning up the messes of the past?
OVADIA KAEMPF: Cleaning up things, in that case…
CIARAN RYAN: That’s what legacy means, the messes of the past.
OVADIA KAEMPF: Absolutely and in that case we were cleaning up acquisitions and at each job I found that…just day-to-day accounting work is fairly simple, it’s like where are you going and what are you building and what have you got, and that’s what keeps me going.
‘Governance is huge in our world’
CIARAN RYAN: Talk about governance for a minute because that’s becoming a massive issue in the finance space and that’s where you’re operating at the moment. Do you spend a lot of time on governance issues? How big is your team, for example, that you manage?
OVADIA KAEMPF: The team I manage is very small, there are six of us, Astute is about 75 people, so it’s not a huge company.
CIARAN RYAN: Where are you based?
OVADIA KAEMPF: In Rosebank but we’re going to be moving to Waterfall Park in a few months’ time. Governance is huge in our world, one of the reasons is we are owned by listed companies, so they have expectations of us, and we are very particular about how we operate and where we go. So the board will decide on a strategy and a way forward, and we as a management team will implement that strategy. We will make sure that everything is in order in terms of reports. We have many committee meetings and we have many targets in terms of diversity and things like that. We articulate very carefully what our risk appetite is because, remember, what we do is if we make profits then we invest in other service offerings, so how do we decide on that. Investing in a new offering might be risky, it might not be risky, so how do we work out that risk appetite and that will come typically from the board in terms of how we do that. We are given mandates to run, which are pretty wide mandates, but they’re controlled in terms of how we run. So governance is very important for us.
CIARAN RYAN: Talk for a second about the changing role of the finance executive, are you noticing certain trends that are happening in your career, which I assume from the little bit of grey hair that you’ve got, you’ve been around a while…
OVADIA KAEMPF: I’ve been around a while, yes.
CIARAN RYAN: So maybe just talk about that.
OVADIA KAEMPF: Things have changed a lot; I think automation and the ongoing automation in the finance world has changed the role of virtually everybody who works in the industry. I always say to the team, in the old world transacting accountants had a job but in the new world it’s all automated, so there’s no such thing as a transacting accountant really. We’ve all got to add value and the value we add really is that we are key enablers to the business. That’s what we do, we assist the business to grow and to go to new heights. Previously finance was maybe a bit separate from operations but more and more now it’s a key part of what everybody does.
CIARAN RYAN: It’s very strategic to the operation.
OVADIA KAEMPF: Yes, and the other change, which is huge, is the data, we sit on a lot of data, so we’re expected to share that data and add value to what the data is telling us. I often use an example at work that finance is like the blood system of a human body, and if a person goes to the doctor and says I am not feeling well, he typically will send that person for blood tests and the blood will not give a cure for the problem but it will give an indication of what the problem is. If you look carefully at finance and finance systems, you can quite easily see what’s the problem in a company and where to fix it.
CIARAN RYAN: In other words, it’s pattern recognition, right?
OVADIA KAEMPF: Yes.
CIARAN RYAN: You do a lot of that, which is data analytics, I guess.
OVADIA KAEMPF: Yes and that’s different from what it was ten years ago, where you just crunch a bunch of numbers. Even if you look at reporting now, ten or 15 years ago a financial report would be a set of numbers with a few comments and maybe a couple of photos. Now an integrated report is a huge report and only a small part of that is numbers. If you look at that report there’s a lot of marketing stuff in there as well but a lot of the things are very relevant to that business, it’s not just the numbers, it’s other things as well. I think the role has become wider and in finance one has to understand the business much, much better.
‘We hold some very poor first-in-the-world records’
CIARAN RYAN: We’re running out of time but two quick questions, are you optimistic about South Africa and if so, why?
OVADIA KAEMPF: I think we are at a very pivotal time; I think there are some very big decisions that have to be made. I think the decisions made now will impact us for many years to come. I think we hold some very poor first-in-the-world records. The one is the Gini coefficient , where we had the worst Gini coefficient in the world
CIARAN RYAN: The most unequal society.
OVADIA KAEMPF: I would love to see that go. The other world record we have is that we have the biggest Cabinet in the world.
CIARAN RYAN: Is that right?
OVADIA KAEMPF: I think so, yes, I stand to be corrected but we have the biggest Cabinet. Another thing, which I think would be very positive is, I don’t know if you’ve seen the difference between the industry wage increases and the government wage increases, it’s about 2%…
CIARAN RYAN: Compounded it’s huge.
OVADIA KAEMPF: There are some easy fixes that can come, there are some big decisions to be made and I think those decisions will actually make a big difference for us in the years to come. We’re not in the most flexible of places, if you look at it from a company’s perspective, if a company has got a lot of money and they can make decisions either here or there that’s fine, but if a company hasn’t got much money then decisions become a lot more critical and a lot of flexibility goes away because one is struggling to use that money as wisely as possible and I think South Africa is in that position now, they’re in a tight spot.
CIARAN RYAN: So not terribly optimistic but there’s a hope…
OVADIA KAEMPF: There is hope, it’s a matter of making decisions and moving forward, there’s certainly hope. I think there’s huge potential for things going right but it’s going to be tough going.
CIARAN RYAN: Right, have you been in a position where as a chief financial officer in a company, or a finance executive in a company, facing a situation like this, it’s like, hell, if we don’t do something we might have to close our doors in a month or two, and then steering the company out of that?
OVADIA KAEMPF: That’s exactly how I look at it and one has to make tough decisions, there’s a cost to decisions and one has to make those decisions to actually keep going as a company. I think South Africa is really in that position now.
CIARAN RYAN: Final question, are you reading any good books, or have you read any good books that you’d recommend?
OVADIA KAEMPF: I have read some really good books and I can recommend two. One is called What is Real by Adam Becker, he’s an astrophysicist. He discusses quantum physics and the theory behind quantum physics. I think quantum physics are absolutely fascinating, I think it’s possibly the next giant leap, once quantum computing comes on board I think that will change a lot of things, but it’s like a thriller of the scientific discoveries of where quantum physics comes from, how it works and how no one really quite understands what it’s about. So that’s a great, great book.
CIARAN RYAN: He explains it fairly well, does he?
OVADIA KAEMPF: He explains it as well as people understand. We are still in a space where the maths works, there are great theories to back it up but no one can quite figure out how it works. So it’s fascinating
CIARAN RYAN: And the other book?
OVADIA KAEMPF:I picked up another book called Outnumbered: From Facebook and Google to Fake News and Filter-bubbles – The Algorithms That Control Our Lives by David Sumpter. He’s a professor of applied mathematics in Sweden and he talks about the algorithms that are used by big companies, where they basically take data and analyse data and start to understand us a little bit more, and then the potential for manipulation and the potential for pushing things in a certain direction. So it’s a big responsibility.
CIARAN RYAN: This is coming up a lot with Google, isn’t it, that they’re fiddling with the algorithms to push results that are beneficial to whoever.
OVADIA KAEMPF: Yes, so that comes up more and more. Facebook, for example, has got about 150 different touch points where they’ll take an individual and they’ve got 150 different data sources, they can build a pretty good picture of that person and then that information becomes very valuable information. So those algorithms are fascinating, they are ever-growing and I found this book very, very interesting.
CIARAN RYAN: Is it written for the layperson and not for the mathematician?
OVADIA KAEMPF: It’s written for the layperson, there are no formulas in it.
CIARAN RYAN: Ovadia, we are going to have to leave it there, fascinating to have you in. Thanks so much for coming in and we look forward to having you back for a progress report hopefully in a few months’ time.
OVADIA KAEMPF: Thank you very much.