Sound financial advice crucial to protect consumers

Brian van Flymen, President of the FIA.

The long-standing dominance of financial intermediaries in the distribution of financial products has been challenged by the emergence of product providers that are marketing directly to the consumer.

Although this incursion represents a small percentage of total industry sales it is nevertheless of concern to both intermediaries and consumers, because financial products need to be accompanied by appropriate advice to fulfil their purpose.

This is according to Brian van Flymen, President of the Financial Intermediaries Association of Southern Africa (FIA), who believes that consumers are best served by skilled financial advisors with intimate product knowledge. “It is extremely difficult, if not impossible, for a call centre operator to communicate the workings of a complex financial product to consumers.” Van Flymen was presenting at the 2013 FIA Regional Conferences held countrywide in March and April this year.

The FIA Code of Conduct, published in 2012, establishes its members as advisors rather than sales people and is evidence of the organisation’s commitment to the professionalism needed to restore confidence in the financial services industry.

In his message to conference attendees, Jonathan Dixon, Deputy Director of Insurance at the Financial Services Board (FSB), confirmed the importance and value of independent advice as a key element of adequate consumer protection. “A key element of adequate consumer protection is the value of good advice and the FSB places a high value on independent advice to customers.”

Dixon explained that equal importance is placed on each role player in the product development and distribution cycle to deliver fair outcomes to consumers. “One of the criticisms of the Financial Advisory and Intermediary Services (FAIS) regime has been that it created a perception that the responsibility for the delivery of fair outcomes rests solely on the shoulders of the intermediary. With Treating Customers Fairly (TCF) we are making it clear that delivery is a joint effort between product provider and the intermediary.”

To further aid intermediaries in delivering fair outcomes to consumers, the FIA Business Practices Manual for Key Individuals – a work by FAIS expert, Anton Swanepoel – was launched at the conference to FIA members. “This manual aligns with the basic purpose of our association, which is to represent the collective interests of intermediaries,” says Van Flymen. “This type of support is crucial to the sustainability of intermediaries and intermediation”.

Keeping to the overarching theme of the value of good financial advice, attendees to the conference were given insights into the developments and challenges of the financial intermediary profession over the next five years. The FIA is a keen participant in the on-going debate as to what constitutes intermediary services and the question of adequate remuneration, both subjects currently under discussion as part of the regulator’s long-awaited Retail Distribution Review.

Van Flymen says the FIA will build on the successes it has achieved over the past five years by keeping a close watch on industry developments and taking cognisance of challenges that will affect our members.

“Above all we strive to remain the dominant player in the financial product distribution channel. It is thus crucial for intermediaries to support pro-consumer initiatives by increasing their knowledge and providing sound advice whenever called upon,” concludes Van Flymen.