How skills development can transform the finance field
Transformation is a ‘key strategic pillar’ of black empowerment-focused Financial Services Intermediaries Network
The financial services sector cannot be transformed without skills development, says Jay Mngoma, executive committee member of the Financial Services Intermediaries Network (FSIN).
Formed in March, the FSIN’s primary focus would be on equipping financial advisers and brokers with skills and knowledge, Mngoma said at an event hosted by the body on Friday. The FSIN is likely to replace the Black Brokers Forum and related bodies that have been representing black financial advisers’ interests.
"We cannot talk about radical economic transformation without skills and knowledge. At the heart of banks and insurance companies are actuaries and accountants," Mngoma said. To change the ownership and management in financial services, it was necessary to build skills, he said.
There was a shortage of skills in the financial advice industry, with an ageing broker force and not enough young entrepreneurs entering the industry, said Gabbi Stais of the Financial Intermediaries Association of Southern Africa. Transformation was a "key strategic pillar" of the association, which would continue to drive broad-based black economic empowerment reporting, in terms of the Financial Sector Code, among its members.
It was important to rebuild trust in financial services if the industry was to be sustainable, said Caroline da Silva, deputy executive officer of Financial Advisory and Intermediary Services (Fais) at the Financial Services Board (FSB).
In terms of the Financial Sector Regulation Bill ("Twin Peaks") the FSB will become the market conduct regulator, with an enhanced focus on fair customer treatment.
Building towards Twin Peaks, the regulation of financial services companies and advisers have undergone a considerable shift. There has been a move away from tick-box compliance towards outcomes-and principles-based regulation, such as treating customers fairly and the retail distribution review.
The FSB is now moving towards replacing the second level of regulatory examinations (RE2). Changes in the qualification requirements of financial advisers would better align these with fair customer outcomes, Da Silva said.
Move towards outcomes-and principles-based regulation, such as treating customers fairly
Simple compliance was not enough. The industry needed to move away from a rules-based approach that did not necessarily deliver good customer outcomes.
Positively, most financial advisers had written and passed the first level of regulatory exams, leading to less regulatory action against financial services providers.
"There has been a direct correlation between the exams and regulatory action, demonstrating that the exams achieved the high-level outcomes we wanted them to," Da Silva said.
The FSB had now proposed to replace the RE2 exams with a "principles-based approach to training" that would require new entrants to obtain training on specific products or on a class of business, such as short-term insurance or medical aid.
These requirements would apply only to new entrants or individuals still working under supervision. Everyone already approved to give advice would be deemed competent and exempt from these requirements unless they started selling additional products or moved into new classes of business, in which case the requirements would apply. In a nod to regulation, Mngoma said the FSIN would be a procompliance organisation. It had instituted member training on Twin Peaks. The FSIN also planned to start an investment academy within the financial services company Imara.