Regulation needs to be a movement, not a hindrance
FSB Executive Officer Dube Tshidi
Jonathan Faurie, FAnews Journalist
Rosemary Hunter, Deputy Executive Officer (DEO) of Pensions
Over the many years that I have spent covering many different industries, I have come to notice one prevailing aspect which is applicable to all sectors of society. While regulation is needed in order to establish order, over-regulation negatively affects
This is the fear of the financial services industry which is going through a lot of changes, many of which are being enforced on the industry by the implementation of regulation. The industry is fast approaching ‘Twin Peaks’ and the prospect of implementing reforms such as treating customers fairly, solvency assessment and management as well and retail distribution review is daunting with many industry players vociferously voicing their concerns.
However, meaningful reform which would benefit the sector will be welcome by all and the Financial Services Board feels it is on the right track to achieve this.
Don’t focus on the regulation…focus on its implementation
Yesterday, the FSB unveiled the high profile appointments of Rosemary Hunter, who will be the Deputy Executive Officer (DEO) of Pensions, and Caroline da Silva who will be the DEO of Financial Advisory and Intermediaries Services (FAIS) from September 2nd. Addressing the media at the announcement, FSB Executive Officer Dube Tshidi encouraged the industry to focus on the implementation of regulation rather than the fact that it is facing changes.
“Regulation is a very complex task. It is a task where it will be hard to find anyone who praise companies that implement it. It is also an area where you will attract a lot of criticism which will be either justified or not. But even if this criticism is unjustified, you still need to stand up and go ahead with its implementation,” says Tshidi.
He added that the majority of the criticism comes of a base of uncertainty regarding the regulation which is being driven by limited information regarding the cost implications of its implementation.
“We need to move towards a situation where regulation is not forced upon a company. It must be a proactive process. If companies make treating customers fairly a culture within their business it will eliminate the majority of the cost of its implementation and the majority of the uncertainty surrounding it. If you cannot look at your product and feel comfortable to sell it to a relative who is on pension, that product is not ready for distribution.”
Over regulation? No…we have learned lessons
Regardless of Tshidi’s desire that focus should be paid on the implementation of regulation as opposed to its future challenges or possible restrictiveness, the fact of the matter is that the industry is staring down the barrel of three new pieces of legislation. This has given fuel to the fire that the industry is over regulated.
But Da Silva feels that regulation is necessary as the industry has learned a lot from the 2009 global financial crisis.
“The amount of regulation in the sector is inversely proportionate to the amount of trust the customer has in the sector. After the 2009 global financial crisis, we need to rebuild that trust. The more we rebuild the trust in the sector, the more we can balance regulation. We need to get this right, not just for the protection of the policyholder, but for the sustainability of the industry as a whole. And the best way to achieve this is through regulation,” says Da Silva.
Because of her reputation and industry experience, Da Silva will be instrumental in the implementation of FAIS. And it seems as if the broker’s concerns will be taken into consideration as they play an important role in the industry.
“The broker is one of the distribution channels whereby the public can access financial services. As the FSB, we need to make sure that brokers are sufficiently qualified to provide the right advice and are there to act in the best interest of the customer. So we will give them all the support they need to achieve this,” she says.
However, it seems as if there is one debate which will not die down and may prove to have a significant impact on the industry.
Although Da Silva hasn’t officially joined the FSB, she gave her personal views point on the fees vs commissions debate, which she has encountered many times during her years in the industry. “South Africa must be one of the last countries in the world which still has a commission regulation. This makes it complicated to formulate regulation which will advance the industry. Because commission is capped, stakeholders look for other avenues in which to gain revenue. We need to balance that with customer protection to make sure that there is no conflict in interest between how the product is being distributed and how the broker/adviser is being rewarded,” she says.
Editor’s Thoughts:
It is clear that the FSB is taking consumer protection seriously, and by encouraging it to become a movement rather than pieces of legislation which may serve as a hindrance, it is making a bold move to reform the industry.
The FSB is ‘talking the talk’, but can they now ‘walk the walk’? It is all very well that you draft legislation, it is another thing entirely to put the correct people in place to ensure that this is effectively implemented. Da Silva will make her presence felt and may prove to be the catalyst for change that the industry needs. She spent eight years as a broker and many years looking at legislation advising the FSB on the best way in which to implement it. So she will look at reforming the industry with the experience of being on both sides of the fence.
By all accounts, TCF will play a major role in the FSB’s reform strategy. But in order for this to be a success, there needs to be significant industry buy in. If there isn’t, the FSB’s TCF ambitions may suffer the same fate as its British counterparts where Tshidi openly admits that TCF failed miserably. Do you feel that the appointment of Da Silva will facilitate the change that the industry needs? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts[email protected].
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