A little more legislation is not going to kill you

01 June 2012 Esmé Davies, Celestis

Education is an essential component of professionalism. It could therefore be argued that the Financial Services Board’s move toward Regulatory Examinations (RE) plays into the financial advisors’ hands. Each certificate, qualification and professional development point raises the overall standard of advice in the industry.

If you are a financial advisor – and you have time to read this article – then I must assume you have successfully completed your Regulatory Exams. Those who have not yet passed should either be burning the midnight oil in preparation, or sweating in anticipation of the exam results.

The way forward

There is an important question I would like to put to South Africa’s many financial advisors. Whether you have passed the exam, are waiting for your results, or are among those who have yet to comply with the requirement, I would like to ask: "Where is the industry going from here?”

Before you answer it makes sense to consider recent developments in the domestic financial services landscape. The initial announcement of the RE requirement sent shockwaves through the industry. Many advisors opposed the additional education requirement as further meddling by the authorities in an already over-legislated industry.

No more extensions

The Financial Services Board (FSB) decision to allow advisors to sit the exam in either English or Afrikaans was welcomed by some as a small victory. And when the qualification deadline was extended to the end of June 2012, exam critics had a field day. Those who believe another extension is imminent will be disappointed.

Advisors must get used to the fact that continued learning is an entrenched principle. The authorities will use both education and legislation as tools in the battle for consumer protection. Industry stakeholders – and advisors in particular – will have to get used to balancing RE on the one hand, and legislation such as the Protection of Personal Information Bill and Treating Customers Fairly on the other.

A necessary evil

The majority of advisors have taken these developments in their stride. Legislation and compliance are seen as necessary "evils” that must be tackled in order to continue doing business in the financial services sector.

Among the negatives of the rising compliance burden is that smaller independent financial advisors are struggling to meet the administrative overheads their practices must contend with. The new Companies Act is likely to add to the burden!

But it is not all doom and gloom. I see many businesses flourishing despite the challenging regulatory environment. Advisors in South Africa have shown time and again that they are resilient and resourceful, and these qualities will ensure they rise to the top once more.

Benefit from technology

In order to meet the demands of increased regulation on their businesses, practices will have to improve processes and enhance operating efficiencies. Technology is already on the side of those willing to look at things differently.

A financial advice practice is an information management business. You can use CRM systems and social media to make broad-based communication easier and more effective, even when personalisation is important. Advisors must stay in the loop with regards how technology can be applied to add value to their client value proposition.

You must also realise that "going it alone” comes at a price to smaller operators. Alliances, associations and networking with like-minded advisors can facilitate a broader service offering to your clients as well as generate time and financial savings where administrative, legislative and other non-income generating obligations are concerned.

Joining hands...

You are not alone in having to deal with regulatory and compliance issues. One of the ways to overcome these challenges is to allow economies of scale and joint venture benefits to form part of your operating regime. It is also worth taking another look at the roles and responsibilities within your business. Why spend time doing what a competent staff member or outsourced service provider could be doing for you?

You need to look past the perceived regulatory threats and focus instead on the opportunities. 

A little more legislation is not going to kill you – and as Kelly Clarkson sings: "What doesn’t kill you makes you stronger!”

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