Economic turmoil muddies outlook for intermediaries
ONE of the biggest challenges facing intermediaries this year is the ongoing global economic turmoil.
Justus van Pletzen, CEO of the Financial Intermediaries Association of Southern Africa (FIA) suggests it is possible that the industry will feel the effects of this contagion even more this year than last.
“To survive the tough times, intermediaries should focus on maintaining and growing their businesses through diversification and the provision of outstanding service and sound financial advice to their clients.”
Van Pletzen says that in addition to the economic environment, each segment within the financial services industry faces unique battles.
“The remuneration issue in the financial planning and short-term industries, demarcation in the healthcare sector and retirement funding reform in the employee benefits space will dominate industry debate this year.”
He says all sectors in the financial services industry also face the overarching challenge of legislation governing competency requirements — specifically the Financial Services Board (FSB) Regulatory Examinations (RE). REs had the greatest effect on financial intermediaries in last year. The exams affected intermediaries in two ways, Van Pletzen says.
First, they created a financial burden in respect of training, study material and exam fees. Individual practices had to allow for potential loss of income due to disruptions to their day-to-day business.
Second, they contributed to a loss of valuable industry experience. Financial services providers that failed the exam had to lapse their licences, with the result that valuable staff and representatives were forced to look for alternative employment in a shrinking financial services career environment. Many financial services providers closed shop and entered into associations with other financial services providers as a solution to this problem.
“There is no disputing that the REs were offered in a format that certain intermediaries found difficult to master, but the bottom line is that these exams are a necessary step towards professionalism in the industry,” he says.
Compliance with the Financial Advisory and Intermediary Services (FAIS) Act and its “fit and proper” requirements will continued to be a key area of focus for the FIA.
“Keeping our members informed and updated on all regulatory developments from a FAIS perspective will remain a priority,” says Van Pletzen.
“We will achieve this by developing new communication channels, hosting workshops on compliance-related topics and offering compliance assistance to members who have a need for face-to-face compliance monitoring.”
He says the FIA is working closely with institutions that offer a FAIS continuing professional development platform for professional development providers to ensure that our members comply with professional development requirements effortlessly. The FIA aims to arrange and facilitate continuing professional development activities for members nationally once the initiative goes live.
“New and amended legislation will remain high on the agenda for all intermediaries. We believe that the constant flux in the regulatory environment will affect our members in two ways
“First, they may find it difficult to cope with the sheer volume of change. Second, and this is perhaps the bigger challenge, they could be overwhelmed by the additional administration and financial burden they face, whether their practice is large or small.”
Financial services regulation is here to stay. The FIA encourages its members to focus on the positive aspects of regulation as well as the long-term benefits to their practices introduced by safeguarding both industry and consumer.