Concerns and expectations for 2017
Anton Schutte, Certified Financial Planner® and Head: Advisory Services at attooh
Kobus Kleyn, a CFP and Director at Kainos Financial Services
Richard Rattue, Managing Director at Compli-Serve
The wave of legislative change hitting the insurance sector could alter the local insurance landscape. While others see this in a positive light, others believe it is complex and will be costly, leading many to find greener pastures elsewhere.
Will brokers, advisers and financial planners find it easy to weather the storm and adapt to a new way of doing business? FAnews spoke to a few financial planners about their views on this and whether they believe regulatory reform is positive or complex and costly.
The talk of the town
“We currently face the Twin Peaks legislation, the Retail Distribution Review (RDR), the Protection of Personal Information (POPI) Act and the Solvency Assessment Management regime (SAM), to name a few. Furthermore, the recent downgrade by rating agencies has introduced certain challenges into our economy. We also have political turmoil and uncertainty and technology is advancing at a rapid rate. Consumers have access to more information. Products change and advisers have to stay abreast. Consumer protection is very much the talk of the town. Interesting times indeed,” says Anton Schutte, Certified Financial Planner® and Head: Advisory Services at attooh.
“I think we are currently experiencing a change from a sales driven model to an advice driven model. Having said that, I am a strong supporter of Brian Foster’s (BeyondRDR) view “We don’t have a regulatory problem; we have a business model problem. The model is broken and needs to be fixed”. I think your typical one man or very small practice/s are going to find it tough and may increasingly join established houses with complete solutions in the compliance, technology, processes, systems, learning etc. space,” said Schutte.
Kobus Kleyn, a CFP and Director at Kainos Financial Services says, “These new regulations will result in a significant increase in costs to our practices, as well as additional compliance and administrative burdens. Compliance has to become part of your practice and not be run as separate cost centre or system and the use of interactive and inclusive financial needs analysis single platforms with compliance must be the preferred tools within our practices. Compliance must be a natural outcome of financial planning practices to reduce cost structures post-RDR.”
Keeping up with the Joneses
RDR, The White Paper, Twin Peaks, SAM… how does an adviser manage compliance in a world where the goal post keeps shifting?
Richard Rattue, Managing Director at Compli-Serve says, “It’s extremely difficult to keep up. The fact that the FSB is rolling out so much at once even makes it challenging for compliance professionals to stay on their toes. If you are running an advisory business as well, it is next to impossible to do this and keep your business running effectively.”
“You need professional help as these changes are not cosmetic, they are structural. If you do not align your business correctly, they will have significant impact on your business. Allocating sufficient time to understanding all these changes and complying accordingly, will mean you will thrive in the future, adds Rattue.
A lesson to learn from others
When asked how South Africa fares compared to other countries Schutte said, “the UK and Australia are ahead of the curve but in my opinion the UK made a number of mistakes which the FSB will hopefully avoid. One which readily comes to mind is the so called ‘advice gap’ which can occur if advisers are forced to only target affluent clients. Our financial services system is very well developed in world terms and we are even leading the way in certain respects. I am confident that the FSB is serious about ensuring that a sustainable model is put in place and not throw out the proverbial baby with the bath water.”
Kleyn says he is confident that South Africa actually compares extremely well with first world countries. “When compared to the UK, Canada, Australia and New Zealand we do not have to stand back and we can all learn from each other’s regulators and professional bodies. The biggest lesson is that regulators must consider the consumer and the adviser as well as our profession as it cannot be one-sided and must have win-win outcomes. I am very optimistic about where these new regulations may lead the industry and in actual fact, I believe it will help speed up the transformation of our industry into a fully-fledged profession,” continued Kleyn.
“On paper, while we compare well from a regulatory perspective, the challenge of course is the enforcement of these regulations,” contuinued Rattue.
Advice for advisers
“My best advice for advisers is not to wait for RDR; understand what is heading your way and start making the necessary changes in your business now. I think effective processes and a high degree of automation in a practice are going to be crucial. Advisers will have to increase their annuity income and build sustainable businesses. Key to this is to have a compelling value proposition which goes way beyond product and which can be explained to clients in a clear and concise manner,” said Schutte.
Kleyn said, “I would encourage my fellow financial professionals and stakeholders to keep their eyes on how this increased regulation plays out, and to learn from the successes and failures from our global peers. The focus should be on enhancing your value proposition with your credentials, qualifications, membership to affiliations like the FPI, FIA and MDRT to name but a few. Finally finding the optimal pre-RDR interim hybrid remuneration system and income flows available from international comparisons would be key and then converting these to a long term sustainable remuneration model post-RDR,” concluded Kleyn.
In addition, Schutte says advisers should never stop learning, “obtaining the CFP® designation should be a given; join a professional body and become completely client centric. The true professionals will have 100 – 150 clients maximum (as opposed to 600, 700 or even more “files”) with whom they truly engage. Commit to excellence. Become a true professional and example to your peers,” concluded Schutte.
Rattue says do not try to be a jack of all trades. “An emphasis on understanding your product and the needs of your customer is crucial. Know which clients to retain or let go. We are moving into an era where you will be charging advice fees, and you need to know where to fit in those fees, where it may become important to know how to segment your clients and service them accordingly.”
Editor’s Thoughts:
As mentioned above, do not wait for the clock to start ticking. Understand what is heading your way, learn from others and make the necessary changes. In 2017, what has been challenging and what suggestions do you have? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
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