Welcome clarity coming on financial advisers
Registered financial adviser or product supplier agent? Be sure to know the difference!
By Wouter Fourie (CFP®), CEO of Ascor® Independent Wealth Managers, 2015/16 FPi financial planner of the year and co-author of The ultimate guide to retirement in South Africa
When you plan for your retirement, or make any type of financial plan, are you seeing a financial adviser, a financial planner or a broker?
The discussion about titles has been in the spotlight recently as part of a debate on the upcoming Financial Advisory and Intermediary Services (FAIS) Act and the Retail Distribution Review (RDR). The industry is currently making submissions about these proposed rules before the deadline of end-March 2020.
As it stands today, you will be hard pressed to distinguish between a qualified adviser who offers professional advice and an adviser who sells you a product from a pre-determined range.
The RDR aims to help clear this up by defining advisers according to their relationship with the supplier of the products that they offer. So, in future you will be able to tell if the adviser is acting as an agent for a specific product supplier and if that means that they are restricted in the kind of product advice they can give.
The proposed rules narrow the titles down to two distinct types of advisers - a product supplier agent (PSA) and a registered financial adviser (RFA).
These rules say that both a PSA and an RFA will soon have to identify themselves to clients. For instance: “I am Mr X, I am a PSA authorised to provide advice on the financial products of ABC Group” or “I am Mr X, I am an RFA authorised to provide advice on the financial products and services of a range of product suppliers”
Apart from forcing advisers to communicate their relationships with product suppliers beforehand, the FAIS code of conduct proposes very strict conduct rules and rules about when an adviser may call themselves independent. It also prohibits anyone from working both as a PSA and an RFA.
These rules say, for instance, that you cannot call yourself independent if you directly or indirectly receive or is eligible for any financial interest from a product supplier whose products you sell or where you own or are owned by a product supplier. This distinction has been welcomed by organisations such as the SA Independent Financial Adviser Association (SAIFAA), who has been lobbying for some time to elevate the status of independent advisers.
One of the desired outcomes of the RDR reforms is to enhance standards of professionalism in financial advice and to build consumer confidence and trust. To this end the FSCA confirmed its intent to acknowledge the professional status of qualified financial planners by reserving the use of the designation “financial planner” for those individuals holding a formal professional designation in financial planning. Persons designated as a “CFP™ professional. These individuals have to meet strict standards that include academic, ethics, experience and continuous professional education as set by the International Financial Planning Standards Board (FPSB) and be members, in good standing, of the Financial Planning Institute of South Africa (FPI), the only recognised professional body for financial advisers in South Africa. (PSA’s and RFA’s can be awarded the CFP™ designation).
So, where does it leave you? For one, you can start by asking your financial planner if they would in future qualify as a PSA or an RFA, also enquire if they have the CFP™ designation and if they are independent. Identifying the scope and type of advice that they are qualified and capable to give.
Remember, financial advice is like any other professional service. You get what you pay for, and free advice is often worth very, very little.
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