Following the example of the UK and Australia, it is now the South African financial advice industry’s turn to face increasing government intervention.
The South African Financial Services Board (FSB) issued a proposal in late 2014 for a new regulatory framework governing financial products and advisers, including proposals to overhaul the remuneration system.
Among a number of recommendations, the government body proposed introducing a formal distinction between ‘independent’, ‘tied’ and ‘multi-tied’ advisers and “prohibiting product providers from paying any form of remuneration” that might influence the advice given, with the exception of commissions on investment products deemed suitable for the “low income market”.
However, according to a new survey of 400 South African advisers – published on CoreData’s ‘Burning Pants’ website – almost half of respondents (43 per cent) believe the FSB is too incompetent to carry out the reforms successfully.
More than three in five respondents (63 per cent) indicated they were “concerned by the prospect” of a commissions ban, while 65 per cent expressed concern about their clients’ willingness to pay fees for service.
“South Africa is now in the midst of this regulatory overhaul, which aims to build trust between consumers and the financial advice industry by introducing greater clarity about the services being provided by advisers to their clients,” said the CoreData post.
“Should the regulator choose to take a [stricter] stance on commission payments – banning them completely – then four fifths of advisers in South Africa face an uphill climb.”
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