Regulations impact sector players
SA’s dynamic financial services regulatory environment directly impacts wealth managers as industry regulators strengthen their supervisory role and more closely monitor resources to improve tax compliance and mitigate against potential systemic risks.
“The industry ’ s expanding regulatory framework aims to deliver numerous benefits, such as stability, consumer protection, efficiency and competition,” explains Sonja Steyn, Head of Wealth Management Strategy at Momentum Consult.
“These evolving regulations have a significant impact on all industry players in terms of compliance, transparency, technology, client service levels, the products they offer and their cost bases.”
The numerous proposed and implemented regulatory changes necessitate ongoing training and upskilling among wealth managers, coupled with regular engagement with clients to inform them of pertinent developments.
“Recent changes to the rules around citizenship, exchange control and tax residency provide a good example. Wealth managers need to guide their clients through these changes and make sure they are aware of the impact,” explains Tamryn Lamb, head of retail distribution at Allan Gray.
The wealth management industry must also find innovative solutions and streamline internal processes to meet the increased risk management and compliance requirements inherent in this regulatory environment while keeping costs low.
“In response, many wealth managers are adopting fintech strategies to improve risk and compliance management while also delivering better customer service and ensuring fair outcomes for clients
“Moreover, adapting to these fast-paced changes in regulation, wealth managers require a change of attitude and a willingness to embrace the challenges that come with change,” says Steyn.
Product development within the asset management space has also helped to address key issues faced by wealth managers.
Wehmeyer Ferreira, COO at Stanlib Index Investment, draws parallels between SA’s financial regulatory landscape and those found in the UK and Australia.
“The changes we are experiencing are not unique. A significant portion of the increase in regulation focuses on transparency.”
And a major focus across the global financial services industry relates to greater transparency around fees.
“A combination of current fees and lower returns put the spotlight on the overall cost of investment. However, the development and emergence of index tracking and systematic active products have addressed fee pressure without compromising the client value proposition,” adds Ferreira.
“Consequently, wealth managers who structure client portfolios appropriately to diversify and mitigate risk use a mix of both active and passive investments, while looking both offshore and locally for investment value transparently and cost-effectively.”