South African life insurers have stepped up
their recruitment of agents according to a local financial data
services company, Astute Financial Services Exchange.
However, while this move saw about 3,800 new
intermediaries enter the industry over the past 12 months, Astute
found that the dropout rate remained very high.
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The end result was that the net number of
registered financial advisers active in the South African life
industry increased by only some 700, taking the total to about
17,400.
From an experience perspective, it is also of
note that few advisers have been in the game for an extended
period. According to Astute MD Biddie Biddulph, only about a third
of advisers have five years or more experience, while just over 49%
have two years or less experience.
Biddulph adds that about half of the more
established and successful agents tend to become independent,
preferring to operate on their own as independent financial
advisers (IFA) or to join an IFA group.
Financial advisers in South Africa are
currently facing a wave of new regulatory rules, including the
Financial Advisory and Intermediary Service (FAIS) Act. Under FAIS,
advisers are required to pass at least Regulatory Exam 1 set by the
Financial Services Board (FSB). The original deadline for passing
the exam was 31 December 2011 but this has been extended to 30 June
2012.
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By GlobalDataAlso looming in the background is a potential
shift from commission-based remuneration of advisers to a fee-based
system. As an initial step towards this potential change, the FSB
issued a paper in November 2011 in which it called on insurance and
investment industry participants to submit comments. In its
initiative, it is clear that the FSB is closely following the route
taken by the UK’s Financial Services Authority (FSA) under its
Retail Distribution Review (RDR) to which it
refers extensively in its paper calling for contributions.
Under the RDR, commission-based remuneration
was abolished at the start of 2012 in favour of a fee-for-services
approach. The FSB is also following closely in the FSA’s footsteps
with its own Treat Customers Fairly (TCF) regulatory initiative
which is tentatively scheduled to be implemented in 2014.
Notably, in the FSB’s version of the TCF, the
six outcomes financial service industry participants will have to
adhere to are virtually identical to those set down in the FSA’s
TCF regulation.
