With Regulatory Exams in the past, what does the future hold for brokers?

D-day for the Regulatory Exams (RE) has come and gone. For brokers who’ve been in the industry for many years but failed to write their FAIS regulatory exams by the due date it may well now be too late.

The information provided by the Financial Services Board (FSB) indicates that across 686 financial service providers the following statistics have been drawn,

1. Key Individuals – Of the 16 332 registered Key Individuals who should have written their exams, 2 942 failed to show up, and approximately 3100 must pass by 30 September 2012.

2. Representatives – 80 463 Representatives should have written the exams. 9 187 did not even attempt the exam and the pressure remains on approximately 15 000 others to successfully rewrite the paper by 30 September 2012.

The figures above reflect a position with consequences for many. This may well indicate the end of careers for many individuals and the death knell for numerous small businesses whose licenses could be suspended or withdrawn. By the time this article is published the FSB will have been in contact with many Financial Service Providers (FSP) who have not complied with the deadlines to discuss consequences.

HCV and all other underwriting managers, are obligated to only conduct insurance business with licensed FSPs and need to strictly and carefully monitor developments accordingly. What is clear is that the full impact to the industry has not yet been felt. Consumers must, at all times, be properly protected and guidance on our roles and duties will no doubt be provided to us by the FSB and our compliance officers.

The current changing landscape may also be opportune for many.

Qualified Representatives and Key Individuals could capitalise on offering their services as outsourced roles so as to retain the operations of entities whose licenses may be in jeopardy. In light of these perceived dynamics, a very cautious and diligent approach needs to be adopted by brokers and their businesses. They need to appreciate the risks of taking advice from companies and individuals over whom strict controls may be difficult to implement.

Furthermore the approval of Key Individuals is not taken lightly by the FSB. Aside from fulfilling the qualifying criteria for their positions these prospective Key Individuals further need to demonstrate that they will take management responsibility for overseeing the financial services of the operation. So, survival may come at a very high price.

In addition to the changes that FAIS bring, the binder regulations also will have significant impact on many existing business models. These have been published for some time now but the full extent of the implications is not yet properly comprehended. The imminent FSB roadshows will shed some light on the parameters and how we are accordingly obligated to adapt.

Is the industry in turmoil?

My view is that although the shake-up is significant, the consumer will ultimately benefit from a professionalised intermediary force whose value is determined not solely by the premium costs saved but rather by the holistic advice provided in the best interests of the client served. And although disputes and dissatisfaction are inevitable in our sector, the number of aggrieved clients should reduce over time. Following this, the industry will be poised to hold its head high as proud members of a once maligned business sector.