Outcomes-based conduct regs near final hurdle
The pending Conduct of Financial Institutions (COFI) Bill has been branded by many commentators as the most significant overhaul of financial sector conduct regulation in South Africa’s history. It seems a fair assessment, provided the word ‘conduct’ appears in the phrasing; it is, after all, the last piece in a far larger regulatory development, being the country’s move to a twin peaks model of financial sector regulation under the FSR Act.
Further delay seems inevitable
The COFI Bill, already years in the making, is painstakingly clearing the final hurdles before becoming law. Per Government Notice 7376 in Government Gazette 54520, dated 17 April 2026, National Treasury gave notice of the imminent introduction of the Bill alongside an explanatory summary of its purpose.
The Bill still has to be formally introduced in the National Assembly, tagged by the Joint Tagging Mechanism and referred to the relevant parliamentary committee before being considered, debated, possibly amended and reported back to the House. And only then can it proceed to the final stages of being passed by both the National Assembly and the National Council of Provinces before being sent to the President for assent and signature. Well, nobody said getting a law passed was easy, dear reader.
Once assented to and signed, the COFI Act will consolidate multiple pieces of legislation into one comprehensive conduct framework, affecting every broker and financial adviser and how they run their respective practices. FAnews attended a panel discussion at Momentum’s ‘Financial advisers at the crossroads’ webinar to find out how COFI will facilitate activity-based licensing, adviser independence and fair customer outcomes.
From rules-based to outcomes-based
Jeanette Marais, CEO of Momentum Group, welcomed the COFI Bill’s focus on client outcomes, summarising it as a shift from rules-based to outcomes-based regulation. The impact of the pending law was considered under three points. First, the fact that delivering sustainable outcomes for clients is part of the financial adviser’s DNA; second, that COFI aims to improve trust across financial institutions; and third, that the Bill is about creating consistent rules and standards across the financial services industry.
“The scrutiny will fall on you having to provide proof that you deliver a good outcome for your client post your advice process,” Marais said. At a higher level, the regulation seeks to create consistent customer experiences across financial institutions. The Holy Grail is an environment where an individual has high trust that whichever adviser or broker they reach out to, their outcomes will be in line with expectations. In this utopia, the layperson would never have to worry about recommending his or her adviser to someone else.
More importantly, the new regulation introduces a certain amount of flexibility insofar as how advisers achieve outcomes that are appropriate for each client. “COFI is built on the pillars of treating customers fairly (TCF),” said Lelané Bezuidenhout, CEO of the Financial Planning Institute of Southern Africa. In her assessment, the pending regulation is both principles- and risk-based. She welcomed the introduction of activity-based F was keen to see how these activities would align with the typical roles performed within an advice practice.
The interpretation and measurement conundrum
Ryk van Niekerk, editor of Moneyweb.co.za, was invited to the panel to share his thoughts on the evolving conduct regulation. He was encouraged by the regulatory direction but concerned over how these improved outcomes would be interpreted and measured. COFI or not, there are plenty of difficult questions. For example, what does this ‘improved outcome’ actually look like? And who is ultimately responsible for delivering this outcome? Van Niekerk opined that generating higher returns or reducing investment fees sat with the provider, not the adviser.
He also took quite a lengthy swipe at current adviser remuneration models, suggesting that the advice fee structures were unsustainable. Case in point, investors typically face an advice fee plus platform fee plus fund manager fee plus fund performance fee plus VAT ‘bill’ that can shave upwards of 2% per annum from parts of their investment portfolios. Marais was quick to defend the role of financial advisers, saying that there were studies supporting that advised households enjoyed better financial outcomes net of fees.
“You cannot get away from the fact that when fees are too high, it is to the detriment of the client; but at the same time, there are not many clients out there who have the time, knowledge, capability and discipline to stick to a plan,” Marais said. “And that, for me, is the very big difference that advisers can make.” Under COFI, the analysis is reframed as whether the client attains an optimal outcome through the advice process with the amounts paid to an adviser for his or her time and expertise factored in.
Lessons from UK RDR
As an interesting aside, Marais reflected on the Retail Distribution Review (RDR) experience in the United Kingdom (UK). “The UK RDR placed all of its emphasis on fees; and it turned out that adviser fees were the most resilient of the fees that were in the chain,” she said. There are a couple of ways to process this information. First, you can assume that consumers will pressure the provider side of the cost basket as COFI progresses. Second, you might contend that advice fees are stickier because clients value the trust relationship they have via that channel.
Bezuidenhout weighed in at this point, saying that COFI would ease some of these adviser-provider tensions. “It requires financial advisers and representatives to be more transparent about the fee they are charging, and the service the client receives in return for that fee,” she said. An added bonus is that the process of explaining this fee for service also partly addresses the consumer education challenge. In this scenario, the adviser plays the part of coach and mentor in addition to that of financial planner.
Turning to the UK RDR, Bezuidenhout warned of unintended consequences of tampering with advice fees. She pointed out that an advice gap had developed after removing commission from adviser remuneration in that market. In plain English, the abolition of commission meant that consumers had to pay for all advice out of pocket, with many simply unable to afford a fee-based advice solution. This sent consumers in search of cheaper alternatives from robo-advice platforms and so-called finfluencers.
Commission may be needed here
“South Africa cannot ban commission,” Bezuidenhout said. “But what COFI is clear on is that you cannot charge twice for the same service, and that any commissions must be disclosed, including why the client is paying the commission…” The same explainability and transparency holds for fees, whether they are calculated as a percentage of assets under management or in some other way.
Her concluding remark to financial advisers was not to panic about the COFI Bill’s decade-long meandering through the local regulatory landscape. Even if the Bill is enacted this year, you can still expect a lengthy transition period. Another plus point for smaller financial services providers (FSPs) is that COFI introduces the concept of proportionality in its application.
The panel moderator asked whether COFI lent itself to hybrid adviser charging models. “The one thing that comes through very strongly in the new COFI Bill is innovation; and that includes being innovative around our remuneration models,” Marais said. Full disclosures and the embedding the TCF principle are non-negotiables alongside such innovations.
Almost six years since COFI last ‘aired’
It was left to the independent journalist to wrap the conversation. Van Niekerk hinted that the panic mentioned earlier in the conversation stemmed from uncertainty. “We have not seen the final version of COFI that will be submitted to Parliament; we have not seen the regulations or the fine print,” he concluded. “The destination has been defined, but not how to get there.” His parting hope was that the new law did not create too much compliance pressure.
The point around uncertainty is worth expanding on. If memory serves, the last time the public had sight of the COFI Bill was back in September 2020, when the second draft was published. And that version is likely quite far removed from what might ‘drop’ in Parliament later this year.
Writer’s thoughts:
The COFI Bill has been years in the making, but its final stretch through Parliament and subsequent promulgation may still test your patience. Are you comfortable with the panel’s ‘do not panic’ assessment of the pending legislation? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
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