Regulations keep IFAs awake at night

Independent financial advisers (IFAs) believe one of their greatest challenges now and over the next five years is regulations related to the industry, according to an internal study conducted by Momentum Intermediary Solutions.
Regulations keep IFAs awake at night
© Nuthawut Somsuk 123rf.com

Of primary concern is the lingering uncertainty of what is expected of them once the phasing in process of the Financial Sector Conduct Authority’s (FSCA) Retail Distribution Review (RDR) is completed.

Based on the Treating Customers Fairly (TCF) principles, RDR promotes a more customer-focused industry in which financial advisers will be required to create tangible value to their clients. In other words, to be successful, advisers will need to cater to the changes in the industry, the economy, and the consumer landscape, by adapting their own value proposition to better serve the needs of their clients.

Defining and understanding their clients’ needs is therefore key. According to the Global Financial Planning Survey, where a total of 19,092 adults across 19 global markets were interviewed, only 27% of South Africans strongly agree with the statement that they are knowledgeable about finances and financial matters.

Furthermore, when compared to the 19 other countries*, including the US, the UK and South Korea; the survey revealed that being debt free is significantly more important to South Africans, with 81% of those surveyed saying that this was very important to them, compared to a much lower global average of 26%.

On the other hand, stats show that 40% of South Africans are in debt default, whicle 65% of the country’s wealth is concentrated in the top 10%. “There are over 30,000 financial advisers in South Africa, yet only one third of the people have a written financial plan," Etienne Gouws, CEO of Momentum Intermediary Solutions, told IFAs at the company’s recent roadshow.

Emotional attachment

Jeanette Marais, deputy CEO at MMI Holding, pointed out the emotional attachment people have to their money, especially in tough economic times, “We live in a disrupted world. It’s impossible to predict where the next global financial crisis will be caused by. It’s important to create a portfolio that neutralises the threat so clients remain invested.”

She emphasised the need to focus on outcomes-based investments, where elements such as risk, cost, time and investor needs can be controlled, rather than a scenario based on returns, which can’t be controlled. “Clients should worry less about the short term. Our job is to engineer comfort so they stay invested.

“Financial advisers are critical to our business and we will make sure the Momentum offering is relevant to enable people from all walks of life and businesses, to achieve their financial goals and life aspirations. Our focus moving forward is very much a committed approach to partnering with our IFAs on their journey to success.”

About Nicci Botha

Nicci Botha has been wordsmithing for more than 20 years, covering just about every subject under the sun and then some. She's strung together words on sustainable development, maritime matters, mining, marketing, medical, lifestyle... and that elixir of life - chocolate. Nicci has worked for local and international media houses including Primedia, Caxton, Lloyd's and Reuters. Her new passion is digital media.
Let's do Biz