Fit and Proper
 Visions of sweating in a gym arise when one hears the word 'fit'. As for 'proper' one immediately thinks of "prim and proper."
The same reaction might well arise once one has read the Financial Services Board's (FSB's) latest pronouncement on the "fit and proper" compliance requirements for financial advisers and key individuals.
We all know (or at least think we know) who financial advisers are. They're insurance salesmen, right? Well, historically, maybe, but the FSB is determined to change things and turn financial advice into a profession, complete with qualifications, exams, continuing education and all.
Already many financial advisers in SA have written and passed the CFP exams - Certified Financial Planner - which are internationally recognized and accredited.
The FSB has determined many different 'categories' of advice and an adviser needs to be accredited for each category in which he/she wishes to practice. Examples of different categories are: Investments (shares, unit trusts, derivatives, etc); Life (life, disability, serious illness cover);
Pensions (pure advice, pensions administration) and Short-term or Property Insurance.
There are different categories for the pure supplying of advice, the taking in of premiums, the administration of funds, discretionary and non-discretionary investments, etc. One has to hold a license for each category of business one wishes to conduct, and one has furthermore to be accredited for each product or facility offered by any particular Service Provider (Service Providers, also known commonly as "SPs") are the different Insurance Companies, Unit Trust Management Companies, Insurance Brokerages, and any self-employed person rendering financial services of any nature.
Minimum qualifications have to be attained, and now the FSB has rules that irrespective of one's present qualifications, everyone in this industry has to write 2 new exams called "RE1 and RE2". These cover compliance and general industry knowledge, as well as specific product knowledge.
As a response to these onerous requirements, the role of a Compliance Officer has come into being. A "CO" (sounds like Commanding Officer, and he/she has similar powers!) is tasked with monitoring all FSB regulatory requirements for a financial services practice, and has to report back to the FSB every 6 months on a wide range of issues. Even the existence of a succession plan, the contents of the data security arrangements and the competencies of office staff have now to be disclosed to the FSB.
If ever there was a case of "Big Brother is Watching You", this is it. Consumers will be the first to benefit, but the cost of compliance will inevitably have to be passed on to them by way of higher fees and costs. So have some sympathy when next your financial adviser speaks about "fit and proper". He/she might be en route to write an exam or attend a course - and the knowledge gained will be for your benefit.
Clive Hill | Financial Services Manager |
