Changing landscape forces brokers to reassess strategic implementation

There is a strong link between Athol Fugard’s play and the current reality of the independent financial advisor in South Africa. The extracts used below come from a discussion of the play on the University of New York’s website:

"In the opening scene of the play Piet Bezuidenhout, a collector of indigenous aloe plants, is attempting to classify a new aloe that he has just found, but which doesn't appear to fit into any of the listed species. Aloes are hearty but ugly plants that survive in hostile environments. Like South Africa, these environments are typically dry and uncompromising. However, to be a "real aloe" the plant must fit into one of the 21 indigenous species. Piet's latest acquisition is peculiar; it doesn't seem to fit; yet evidently it exists.”

Ironically, there are approximately 21 licence categories listed by the FSB. Depending on their fields of expertise; advisors, unlike aloes, can belong to as many as they like provided that the Regulator, has afforded them this status.

During the initial licensing exercise, self-classification was in order, but things have changed since then. New entrants now have to gain the necessary experience under supervision.

When the level 2 regulatory exams are implemented, advisors will have to prove that they are worthy of being classed in a specific category. Specific qualifying criteria per product type were published in 2008, and one can only wonder if this is still valid, in view of market and product changes.

Many advisors will have to reconsider the range of products they are currently licensed for.

The indications are that regulatory demands will force them into becoming specialists, rather than generalists. This will impact negatively on those individuals who elected to become a one-stop financial services provider for a small, select group of clients, or those operating in the "platteland”, where the potential client base is limited.

The "hostile environment”, referred to in the play discussion, used to be limited to a public perception that the industry, in general, did not always deliver on its promises. Consumerism and regulation became new allies in this onslaught, in the eyes of many financial advisors. They found it difficult to conform to a climate of compliance while feeling threatened by a constant barrage of changes in their established way of working.

Like the aloe managed to thrive in "hostile territory”, many advisors overcame setbacks in the past. The reduction in commission of healthcare brokers led to a dramatic drop in numbers, yet many have survived and are doing well.

The big challenge is not the "dry and uncompromising environment”. They have learnt to cope with, and in fact thrive, under these conditions. The real threat is a new, foreign climate to which they have to acclimatise.

 

Industry figures indicate that about 2 000 licences have been cancelled since the introduction of regulation, and we still await the fall-out after the level one regulatory exams.

The dinosaur became extinct because it could not adapt to environmental changes. To survive, it is therefore necessary to embrace change, rather than fight it. Perhaps the words of Darwin show the way forward for those for who neither fight, nor flight, is an option:

The survival of the fittest is the ageless law of nature, but the fittest are rarely the strong. The fittest are those endowed with the qualifications for adaptation, the ability to accept the inevitable and conform to the unavoidable, to harmonize with existing or changing conditions.

Those who elect not to adopt this approach will find that they are regarded as peculiar – they do not seem to fit, yet evidently exist.