Professionals: Life » Press Room

A loss Consumers can ill afford

The FSB regularly provides an update on the number of licences which were suspended or withdrawn and those whose status was reinstated after withdrawal or suspension.

The table below provides details of such reports released over the last 13 months.
 

FSP update on:	Suspended	Suspension Lifted	Licences Withdrawn	Licences Reinstated
30/01/2012	514	79	3
13/01/2012	10	123	125	7
03/10/2011	3	323	15	9
10/11/2011	826	56	10	22
23/09/2011	27	122	15	22
15/08/2011	258	57	21	25
22/07/2011	57	50	15	33
19/05/2011	26	106	502	22
31/05/2011	67	158	5	19
16/05/2011	909	114	23	20
15/03/2011	29	10	8	17
18/02/2011	5	46	1485	2
Total	2731	1244	2227	198

The majority of suspensions and withdrawals were imposed as a result of non-payment of levies and failure to submit compliance reports and/financial statements when due.

It is difficult to believe that FSPs are still unaware of these requirements, 8 years after the FAIS Act was implemented. There must be other reasons for this loss in FSP numbers.

A closer look reveals that the “offs” (4 958) outnumber the “back ons” (1 442) by 3 516.

This is a staggering number in anybody’s language.

As someone who has spent a large part of his career recruiting, appointing and training financial advisors, I am more than aware of the high turnover of advisors in the industry. Positive growth in real numbers is a major achievement under normal circumstances.

What makes the figures even more startling is the fact that we are not talking about 3 516 individuals; these are licenced entities, often comprising reps and clerical staff. The real damage is therefore considerably bigger than the figures would suggest.

Whilst there is no empirical evidence to support this, we are of the opinion that a substantial number of advisors plan to exit the industry when the deadline for the writing the regulatory examinations arrive.

Most of these will be vastly experienced practitioners. To calculate the impact on the quality of advice is not possible, but it will be vast, and in stark contrast with the aim of regulation, namely to improve the service given to consumers.

Proposed future changes in the industry include the introduction of a “Treat the Customer Fairly” set of rules and a review of commission, with the stated intent of changing advisor remuneration to a fees-based model. There are also plans to introduce a Super ombud to replace the current system of industry appointed ombuds.

One must assume that the figures quoted above will be taken into account when plans are made to implement further control measures.

There are certain positive signs as well: the current requirements in terms of financial soundness is under review, and we think that other measures are also receiving attention, mainly as a result of the financial impact thereof on the the smaller FSPs.

Most of what we see in place today, in terms of regulation, stems from what is used overseas, particularly in the UK and Australia.

Whilst there is no need to re-invent the wheel, one wonders how much consideration was given to our uniquely South African set-up, particularly from a demographics perspective of consumers of financial product consumers?

As we said in an earlier article: the cost of financial advice could become so expensive that only the rich would be able to afford it.

Where would that leave those consumers most in need of it?

To paraphrase an old saying:

If you think advice is expensive, consider the cost of ignorance.

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