Moonstone: Truth, rumours and Lies

One cannot help but gape in surprise at how quickly facts can attain woolly wings and become a nightmare.

During presentations in Cape Town and Johannesburg, the FSB outlined plans to investigate a number of matters which were first raised in 2006 during the review of remuneration exercise in respect of long-term savings products.

Some sensitive issues were raised as points for discussion i.e. fees replacing commission for investment business and as-and-when commission being considered for risk business.

The background document sets out the objectives as follows:

…to ensure that the definition of intermediary services and related remuneration structures in the insurance sector –

• promote appropriate, affordable and fair advice and services to potential and existing policyholders; and
• support a sustainable business model for financial advice.

It is envisaged that the contributions will assist the FSB in formulating a comprehensive discussion document for public consultation on these issues.

The document contains a lot of information outlining the Regulator’s perspective on the matter, and asks for feedback and comments on specific issues.

It concludes:

The FSB looks forward to a constructive engagement on the issues outlined in this letter, guided by the twin principles of promoting appropriate, affordable and fair advice and services to potential and existing policyholders, and supporting a sustainable business model for financial advice.

Your contributions will assist the FSB in formulating a comprehensive discussion document which can form the basis for extensive public consultation.

The first deadline for feedback from the industry representative bodies is 30 March 2012. The information received will then be used to draw up a discussion document for public consultation as outlined above.

This document was published on 11 November, and introduced at the venues mentioned above.

Imagine therefore my surprise when I received the following enquiry less than a week later:

I was hoping to get any updated information regards the "proposed" no commission on investment products going forward. I have heard from a few people in the industry that it seems the FSB has moved up all the intended dates to implement these changes. My main question is, do these proposed "fee only" earning apply to pure risk products also or do you have any insight as to the structure of commission/earning on risk only products.

Secondly has there been any suggestion that the standard short term-as-and when commission structure is also going to be changed or amended?

I have a lot of empathy for those who feel threatened by rumours such as the above doing the rounds, but I have no sympathy for those who maliciously start these rumours for personal gain.

Yes, it is a very serious matter, and we are going to have to put in a lot of work to ensure a fair outcome for practitioners but consultation will always get one further than confrontation.

Moonstone has successfully applied for inclusion in the discussions, and will apply its intellectual capital and industry experience to ensure a fair outcome, not only for our clients, but for the industry as a whole.

We suggest that those who want to take part in the process contact one of the following industry bodies, depending on their membership:

ASISA
SAIA
FIA
FPI
SAUMA