Taking steps towards a proactive industry
For much of 2013, the focus of the financial services industry was on the outlook of the Financial Services Board (FSB) and their development of key pieces of legislation which they felt would improve the industry. This was largely done off the back off international policy formulation which is the focus of meetings of the World Federation of Insurance Intermediaries (WFII).
A high level delegation from the Financial Intermediaries Association of Southern Africa (FIA) is preparing for its participation in the upcoming World Federation of Insurance Intermediaries (WFII) 15th World Council and Executive CSE Committee meetings to be held in Sydney, Australia from 15 to 17 March 2014.
Justus van Pletzen, CEO of the FIA, and Seamus Casserly, Past President and Director of the FIA and also the current chairman of the WFII, will represent the African Regional Structure at this year’s meetings.
"The purpose of the WFII is to detect international trends in intermediary-related issues as well as to give policy direction to its members on current and future issues on the international agenda,” says Casserly. He adds that the principles and positions of the WFII are defined each year at the organisation’s World Council and Executive CSE Committee meetings. These principles then serve as guidelines for intermediary associations around the world.
"It is important that we both support this initiative financially, and that we participate in this initiative on a policy making level. As an advocacy group for the African region, we cannot afford to be reactive when it comes to policy formation. We need to anticipate policy trends in order to be ahead of the curve,” says Casserly.
Influencing global policy
Recovery from the 2009 global financial crisis has been slow, but is gaining momentum. A key part of this is to build up the capacity of the financial services sector in order to ensure that consumption levels steadily increase.
This will largely depend on international policy developed and implemented by global finance ministries, and the FIA, through its association with the FSB, has an opportunity to possibly influence this.
As an advocacy group representing the interests of global insurance intermediaries the WFII is invited to provide inputs to the powerful International Association of Insurance Supervisors (IAIS). The IAIS represents more than 170 insurance ‘supervisors’ and is instrumental in debating and steering global insurance regulation through its affiliation with the G20 group of finance ministries.
"The WFII therefore creates an additional channel for the FIA to engage with its own market regulators,” says Casserly. "Jonathan Dixon, Deputy Executive Officer of Insurance at the FSB, along with other FSB staff, is active in a number of the IAIS committees that are responsible for setting the rules that global insurance regulators abide by.”
Issues on the 2014 WFII agenda
Because of the importance of WFII, the issues on the agenda of the meeting have the potential to have a major influence on the African region.
One of the major issues that will be discussed is the improvement of cross border trade assistance. "Because of the global nature of insurance, supporting effective trade assistance is an important issue that needs to be resolved. There are massive structural regulatory impediments to insurance and insurance trade across borders. WFII, along with the FIA, are going to look into the African region to see how bad it is, and how it can assist in improving this,” says Casserly.
Aside from structural regulatory impediments to cross border insurance trade, it is likely that the US-introduced Foreign Account Tax Compliance Act (FATCA) will be under discussion at this year’s WFII gathering.
Member associations of the WFII have already engaged with the appropriate structures in their respective country markets to provide feedback on these issues. The FIA, for example, has discussed some of its concerns with the FSB in the hope that the regulator can use its position in the IAIS as well as its access to the South African Revenue Service and the Department of Trade and Industry to ensure positive outcomes.
"The FIA’s participation in WFII structures ensures that we are kept up to date on the open exchange of information and the frank assessment of issues that are potential future drivers of change in the industry,” adds Van Pletzen. "It is important for South African intermediaries to be represented on the global platform in order to anticipate regulatory interventions and to inform their ongoing discussions with local regulators.”
The dragon in the middle of the room
Among the three pieces of legislation that the FSB put forward last year, the Retail Distribution Review (RDR) has the potential to have the biggest impact on the adviser. This will be a hot topic of discussion at the WFII meeting bearing in mind the recent shortcomings of newly implemented European remuneration models.
Remuneration structures in the life, risk and investment space as well as the global trend towards comprehensive financial consumer protections will also feature on the WFII agenda. "A number of European countries have already adopted a no commission approach with respect to intermediation in the life risk and investment disciplines,” says Casserly. "Stakeholders in the South African financial services industry are still formulating a policy in this regard.”
The FSB is currently leading a comprehensive review of broker remuneration through its RDR discussion paper. This review will redefine definitions including advice, intermediary services and product sales along with appropriate ways to remunerate financial intermediaries for each of these activities.
We will stick by our obligation
"The experiences of other country markets have informed our position on the remuneration issue and we will not support regulatory reform just for the sake of it,” says Van Pletzen. "The FIA will ensure that intermediaries are adequately remunerated for what they do, whether it is for advice-giving or related intermediary services.”
While Van Pletzen’s comments may be seen as an act of defiance, it reaffirms the standpoint that although the FIA does have a close relationship with the FSB, its first obligation is to make sure that intermediaries are sufficiently protected in every aspect of their business.
The FIA’s position on intermediary remuneration is clear. "Without the involvement of an intermediary, no financial product will fulfil the purpose for which it is sold. Therefore, each sale must be accompanied by sound advice,” concludes Van Pletzen. "The value of independent financial advice to customers is a critical component for adequate consumer protection.”
The WFII is also tasked with the ongoing liberalisation of insurance intermediary markets globally, to the ultimate benefit of consumers. They do so by focussing on the IAIS Core Insurance Principles, in particular those that lay down market conduct rules for intermediaries. South Africa is on track with its consumer protection responsibilities through the phased introduction of the FSB’s Treating Customers Fairly (TCF) regime and various other pro-consumer legislations.
Editor’s Thoughts:
It
seems as if the FIA has increased its focus on the importance of its
participation in the WFII because of past experiences. Being proactive in the
formulation of policy will ensure that intermediaries are on the front foot and
not playing catch up. It can ill afford to adopt a wait and see approach when it comes to the important issue of intermediary
renumeration. Please comment below, interact
with us on Twitter at @fanews_online or email me your thoughts [email protected].
