FIA code of conduct crucial to building sustainable business

While it can take a financial intermediary hundreds of meetings, thousands of client interactions and even decades to build a sustainable and successful client base, it takes just one negative client interaction to destroy the financial success of the int

This is according to Anton Swanepoel, Financial Advisory and Intermediaries Services (FAIS) Act expert and author of the Financial Intermediaries Association of Southern Africa (FIA) Code of Conduct, who presented at the recent country-wide 2012 FIA Regional Conferences. “The biggest challenge facing financial advisors is to not only protect their current client base, but to grow their practices in an industry that is facing increasing regulatory and compliance issues.”

It is becoming increasingly imperative for financial advisors to guard against taking unnecessary risks while growing their business, says Swanepoel. “Effective client interaction is becoming key to achieving growth and sustainability. The FIA Code of Conduct provides a step-by-step guide for intermediaries to best ensure their clients trust them while also ensuring their business remains protected.”

Swanepoel says every client interaction has a beginning - a professional introduction - and an end - the provision of an appropriate product provider solution followed by ongoing financial advice and service excellence. “A professional introduction is always followed by the gathering of information about the new client in order to determine the client’s specific needs and objectives.

“After investing sufficient time with the client to obtain appropriate client information, the advisor will obtain letters of authority from the client to obtain more information from third parties where necessary, conduct an analysis, obtain quotes, prepare a report and present a proposed solution, with the objective of concluding a transaction with the client. This culminates in the creation of a contract once the client is happy with the offer. While in the past, this contract may have been verbal, it is essential in today’s highly regulated environment that the contract is written.”

He says that once the contract is finalised, the financial intermediary must set into action the various solutions that have been signed off. “During this phase, the advisor mediates between the product provider and the client - no longer does the financial advice process end at implementation. The Financial Services Board (FSB) is currently attempting to establish a practice of ongoing fees or commissions being stopped in the absence of ongoing services being rendered to clients. Conducting an annual review therefore becomes increasingly important to maintain client relations and earning an annuity income. This can be used to the intermediary’s advantage as engaging with clients at least once a year better ensures competition cannot take their business.”

International research showed that it costs far more to attract a new client than to retain an existing one, says Swanepoel. “Intermediares should take a lesson from the product suppliers who go the extra mile to avoid early contract terminations, lapses or surrenders.

“Following a step by step process, such as the FIA Code of Conduct, better ensures a trusted and long-lasting relationship can be built and maintained between financial intermediary and client through honest, fair, consistent and efficient interactions,” says Swanepoel.

The FIA Code of Conduct was established following feedback from the various Regulatory Examination sessions that took place prior to the exams, says Swanepoel. “The Code is basically a written set of best practices and processes that intermediaries have developed and perfected over time which best ensure adherence to current legislation.”

While the Code cannot guarantee that clients will never complain, it does protect intermediaries in the event that a client does complain by ensuring that the appropriate procedures were in place and the best actions were taken during every step of the client interaction process, says Swanepoel.

“All financial advisors must realise that even though building a successful business can be difficult, protecting their current business is even more challenging in today’s increasingly tough regulatory environment. The FIA Code of Conduct is a simple, easy way to ensure a financial advisor’s practice can grow and remain protected at the same time,” says Swanepoel.

Justus van Pletzen, Chief Executive Officer of the FIA, says that FIA members responded very positively to the FIA Code of Conduct at the recent FIA Regional Conferences. “The feedback from members has been incredibly encouraging and reveals their dedication to the professionalisation of the financial services industry.”