The RDR elephant
Throughout the panel discussion of day two, focused on the three divisions of the PSG Konsult business – PSG Insure, PSG Wealth, PSG Asset Management – was the looming impact of the proposed RDR changes. Barry Taylor of the FIA emphasised the need for all advisers and brokers to inform themselves thoroughly of the regulation and read the document in full. “The better informed we are, the better able we are to do our jobs.” The FIA’s role, he said, was to work to influence the outcomes for the intermediated space. Fundamentally, the association agrees with the principles behind the document, both its protection of clients and consumers, and its protection of the integrity of the market. It would also assist in ridding the intermediary space of any lingering improper practices. Nonetheless, there are concerns, said Taylor. He suggested there was need for a thorough economic study of cost versus benefits on the specific changes proposed. “Our concern is that there will be increased costs, reduced revenues and losses in human capital. We are also concerned about the likely reduction of innovation as a consequence of the changes. Without this – our business is dead.” The panel noted also that in the United Kingdom, the only other market with similar regulation, the regulation does not apply to the short-term industry there, only long term. The challenge, said Taylor, would be to persuade the regulator of the nuances within the different lines and disciplines – commercial versus personal lines for instance – within the context of RDR. He added that in Australia, market conduct is heavily regulated but that remuneration is unregulated and that in that market, that balance works well for them. Ultimately, because South Africa is a member of the G20, regulation is here to stay and whatever happens within that broader community will come here. “Ultimately, we need to prepare for that,” noted Taylor. CEO of PSG Insure Distribution, Bertus Visser, noted that a further evolution that would be interesting to watch was the trend for direct players to come after the commercial space, which has until recently still been largely the domain of the intermediary. Nonetheless, he said that in a challenging market struggling with regulatory change, commercial remained the more profitable and stickier part of the business to focus on.