Change agents: How independent financial advisors are evolving
The Financial Intermediary Association of Southern Africa (FIA) 2013 Regional Conference took the next five years as its broad theme, touching on issues relating to regulatory reform, remuneration, technology and risk management. One of the key messages,
Although Treasury has been arguing for some time that the cost of financial services is too high, Gavin Came, Chair of the FIA Financial Planning Committee, said it is his opinion that brokers are underpaid for what they bring to the table. So the question remains: what is fair remuneration?
With a fee-based approach gaining momentum, it will be interesting to see how the Financial Services Board (FSB) manages its review of the entire value-chain of retail financial services. We already know that remuneration restructuring is likely to affect both investment and risk business – Jonathan Dixon, deputy executive officer of the FSB’s insurance division, reminded attendees of this in a pre-recorded message screened at the conference.
Dixon suggested that the remuneration model for advice may have to be relooked. But should policyholders pay a fee for advice and risk management services in the risk product space? He indicated that key proposals will be ready by the end of the year but there will be more than enough time for the industry to adopt them. Of course, the issue of remuneration in the risk space is a contentious one. However, Dixon acknowledged the argument for an ongoing stream of remuneration to match the maintenance and servicing of policyholders.
TCF is a joint effort
Dixon also mentioned that because the FSB’s overarching mandate is to protect consumers it is vital to put the key outcomes of TCF at the centre of any regulatory reform. He suggested that delivery has to be a joint effort between product providers and distributors, who will have to work in partnership. A criticism of the FAIS regime has been the perception that responsibility rests solely on the shoulders of the intermediary, which has been vigorously opposed by intermediaries, for obvious reasons. “TCF makes it clear this is a joint effort,” Dixon said.
In her presentation ‘Treating Customers Fairly’, the FSB’s specialist analyst Janet Ehlers said that TCF should be central to corporate culture and financial advisors would do well to make use of and apply the TCF Self-Assessment programme on the FSB’s website.
Some of the questions you could ask yourself, for example, are: “How do I confirm which target market a product is designed for? How do I market accordingly? How do I test the clarity and appropriateness of product material? What do I do if it is not up to standard? Do I insist product suppliers give me specific product training? What level of feedback do I give product suppliers on products and services?”
Consumer protection has placed a different emphasis on how financial advisors do business and the move from being sellers of products to sellers of financial advice represents a changing mind shift, one that needs to be embraced, said FIA president Brian van Flymen.
In an environment in which independent financial advisers (IFAs) are leaving the industry, in not insignificant numbers, the role of the IFA is perhaps more crucial than ever before. Let’s not forget that IFAs are at the forefront of consumer education, among other things, and their role should not be played down.
Editor’s thoughts:
We can expect discussions around TCF and remuneration models to heat up this year. Let us know how you feel about fee-based remuneration – would it work for you? Comment below or email [email protected].
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