NAIFA calls for suspension of regulatory exams

01 April 2011 National Association of Independent Financial Advisors (NAIFA)

The National Association of Independent Financial Advisors (NAIFA), yesterday called for the suspension of the process whereby advisers have to sit for the first set of regulatory exams to be written by financial advisers. The reasons cited below jointly and severally justify the call:

· It is unclear what benefit is to be attained by advisers writing this exam or their clients and it is unclear as to what the ultimate regulatory objective of the exams is, given that the objectives of the Financial Advisory and Intermediary Services (FAIS) act are simply the regulation of the rendering of financial services in South Africa – an apparent end in itself. The content of the exam is focused on the Financial Advisory and Intermediary Services act and the Financial Intelligence Centre act.

Whilst ongoing education and professionalization of the financial advisory industry is supported, requiring advisers to know, in some instances, the verbatim text of the FAIS act does not add any value to consumers. Such a requirement is tantamount to expecting a journalist to sit for an exam before being allowed to publish an article, a financial director to pass an exam on Internationally Recognised Financial Reporting Standards or for a small business owner to pass an exam on the Consumer Protection Act before being allowed to continue cutting keys or fixing shoes. Advisers are already required to meet certain qualifying criteria that are aligned with the nature of their businesses and the complexity of products in which they deal. These criteria are recognised qualifications and skills programs and must be industry specific.

· The exams are currently to be written in English only. Considering the potential impact on the livelihood of as many as two thirds of financial advisers as well as the staff they support, the exams must be presented in all official languages. A failure to do so would result in a breach of advisers’ constitutionally guaranteed rights. The examples of exorbitant costs and undue delays promoted by the Registrar of Financial Services Providers as reasons why the exams should only be presented in English do not convince against the background of the failure of so many businesses, the loss of so many jobs and potentially leaving millions of consumers destitute.

· The current exams are so-called closed book exams. In some instances, learners are required to know verbatim extracts from the act. Such an approach is reminiscent of school exercises and does not befit training and education for adults – some of whom have been in the industry for four or five decades. Exam conditions should simulate real life experiences, and in real life all professionals refer to their reference works when in doubt.

The inception of the exams was delayed. They were due to start during the first half of 2010 but were only ready from November 2010. No allowance for this delay has been made in the determination of the cut-off date. This will cause inevitable logistical problems and holding advisers responsible for this would be unfair.

Postponing the exams for a period of six to twelve months will allow wider consultation with affected parties and industry bodies and result in much wider acceptance of the exams provided their objectives are clearly spelled out. Adopting a reasonable approach by reference to the issue of language and placing emphasis on job preservation at a time when South Africa desperately needs it, will show that the interests of the regulator are aligned with the interests of consumers.

For more information on NAIFA, please log onto the website –

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