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Can brokers truly be impartial?

03 August 2015 Annelé Oosthuizen, Alexander Forbes Health

The Retail Distribution Review (RDR) is the Financial Services Board’s way of guaranteeing that the financial services industry operates in an open, ethical manner.

Part of this is ensuring the independence of certain brokers. The dictionary describes independent as: free from outside control; not subject to another's authority or as a thorough and independent investigation of the case.

The Council for Medical Schemes points out that independent means entitled to the best advice: As financial advisers, brokers are also reminded of the Financial Services Board legislation which clearly stipulates that consumers are entitled to best – which means independent – advice at all times.

Not an option

Furthermore, the release points out that any advice a broker offers must accord with the principles of best advice, and must have the best interests of their clients at heart, and be based on a proper assessment of the situation.

If a broker is adhering to the General Code of Conduct when advising clients on medical scheme options, brokers cannot afford to not be truly independent. The General Code of Conduct (FAIS Act) stipulates that a provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.

Clear communication

The Act further states that a provider may not, in dealing with a client, compare
different financial products, product suppliers, providers or representatives, unless the differing characteristics of each are made clear.

Further, they may not make inaccurate, unfair or unsubstantiated criticisms of any financial product, product supplier, provider or representative. It states that a provider must disclose to the client the existence of any personal interest in the relevant service, or of any circumstance which gives rise to an actual or potential conflict of interest in relation to such service, and take all reasonable steps to ensure fair treatment of the client.

Guaranteed impartiality

I believe that independency from product providers will guarantee impartialness, and brokers that who are focused on their clients’ interests putting the member first.

There should be a culture of providing the highest standard in Treating Customer Fairly (TCF) and to act in the best interest of the member. Independent brokers can also save a client time as all the investigation is done by the broker. This single point of contact can save a client money by sourcing the best product to suit the client’s medical and financial needs, and should not be restricted to a specific offering.

Should the main reason for placing business at a specific medical scheme purely be due to financial incentives and relationships, questions may be raised on the independency of the brokerage.

Asking questions

The question may however be raised if brokers are unbiased. Medical Scheme brokers are deemed to be experts with a wide knowledge of the industry. Clients therefore have access to deeper levels of knowledge, expertise and additional skills.

Corporate brokers mostly offer medical schemes to clients where there are existing broker agreements in place. If a broker only has a few medical scheme contracts then the question about impartiality can still remain. Clearly such brokers will naturally lean towards those products where they have a contract, even although there may be better value in the marketplace.

With over 25 open medical schemes and over a hundred different options, the role of the broker is vital to assist members and employer groups in sifting through the options in order to find the best fit for their healthcare needs. It would therefore be in the best interest of the employer and their staff to find a broker with the necessary knowledge and experience in the healthcare market in order to assist them with this difficult choice.

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