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Your DOFA is more important than you realise!

01 October 2012 Paul Kruger, Moonstone Information Refinery

The importance of one’s date of first appointment – labelled by the financial services industry with the quaint acronym “DOFA” – was highlighted during a recent television broadcast by the Financial Services Board (FSB). Do not let this mislead you as to its importance.

In order to understand why your date of first appointment (DOFA) is so important,we must consider that financial advisory practices existed prior to 30 September 2004. This is the date on which the Financial Advisory and Intermediary Services (FAIS) Act became the de facto GPS to guide the industry across the regulatory "roadmap”.

A line in the sand

It was not possible for financial advisers to wave a magic wand and start afresh on 30 September 2004. The majority had vast industry experience which could not simply be swept under the carpet. By the same token, new entrants to the industry had to be given the opportunity to gain the necessary knowledge and skills demanded by the new regulations.

The first attempts at stipulating an "industry standard” level of knowledge was largely unsuccessful. Recognition of Prior Learning (RPL) at best indicated that a one-size-fits-all approach would not work. At one stage, it was possible to obtain the minimum standards set for the short-term personal lines field, for instance, and practice as an investment adviser.

Redefining the standard

In 2008 legislation irretrievably changed the standard an adviser would have to achieve in order to be considered "fit and proper”. The standard consisted of five elements, namely financial soundness, operational ability, honesty and integrity, competency and continuous professional development (CPD).

The first three, although important, did not place too much stress on the adviser. Most advisers already had these standards in place. It was also agreed that CPD would follow at a later date – as soon as the industry met with various pre-conditions.

The competency requirement therefore emerged as the most strenuous of the five. This is also coincidentally where one’s DOFA plays a big role. The three critical elements contained in the competency category, are: qualifications, experience and regulatory exams (RE).

Specific qualifications

The requirement in terms of a qualification increased from the original once-off RPL assessment – to a minimum number of credits – and eventually to a full qualification that is licence-category specific. Those in the business before January 2010 were given various options, but new entrants were required to obtain specific qualifications in order to practice.

Representatives are allowed six years from their DOFA to work under supervision whilst attaining the necessary knowledge, skills and experience. They are also obliged to write the regulatory exams within specific time frames, again determined by their DOFA.

Experience counts, but...

Minimum experience standards were laid down, depending on what line of business one worked in. Those with a DOFA after January 2010 were given some reprieve to make entry into the industry easier, as explained above.

Key Individuals however, as the mentors of the business, can only act in such capacity if duly qualified and experienced. This applies also to their ability to supervise representatives under supervision. They need to be qualified in the relevant licence categories in order to supervise representatives being trained to market specific products.

The "RE” in the room

The biggest impact of DOFA concerns the date by which candidates need to have written RE. Those appointed before 2010 initially had a deadline of 31 December 2011, which was then extended by six months – and then by nine months… (These extensions only applied to individuals who wrote before the initial deadline, but did not pass).

Appointees from 2010 onwards have until December of the year in which their second year of service falls. A person who entered the industry for the first time on 1 June 2010 will therefore have until December 2012, provided such a person is working under supervision.

Those who re-enter the industry after an absence of five years will be regarded as new entrants and will forfeit any benefits they may have gained pre-2010.

Quick Polls

QUESTION

The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

ANSWER

Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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