Legislation to better serve investors
The Financial Sector Conduct Authority (FSCA) issued one of the much-anticipated discussion documents on the implementation of the Retail Distribution Review (RDR). Through enacting relevant and progressive legislation, the FSCA remains committed to ensuring that customers achieve fair outcomes when dealing with financial services providers (FSPs) under the framework of Treating Customers Fairly (TCF).
RDR encompasses a series of regulatory reforms aimed at ensuring that financial services models:
support the delivery of suitable products and provide fair access to suitable advice for customers;
enable customers to understand and compare the nature, value and cost of advice and other services that FSPs provide;
enhance standards of professionalism in the industry to build consumer confidence and trust;
enable customers to benefit from fair competition at a price more closely aligned with the nature and quality of the service being rendered;
support sustainable business models for financial advice that enable adviser businesses to viably deliver in the long term.
The key objective of RDR is to remove or mitigate conflicts of interest that may arise in relationships between financial advisers and the product providers.
Through the discussion document, the industry is deliberating over one of the most critical proposals of RDR: how to define and price a variety of investment product and the investment services offered by an array of providers / advisers.
The objective of the FSCA’s discussion document is to seek out input from those in the investment industry to ensure that future legislation and licensing take cognisance of the actual work performed and relationships between role players, so that the investment value chain is clearly understood.
RDR has distinguished between the following:
Product supplier agents (PSAs): These are advisers that operate as part of the licence of the product provider and may only provide advice on the products of that product provider (and other product suppliers in its group).
Registered financial advisers (RFAs): These are advisers that are separately licensed in their own right to provide advice on whichever products their licence permits, and are not limited to offering the products of any particular product provider.
Furthermore, an entity will have to make a choice between the aforementioned adviser categories, as operating as both a PSA and an RFA will not be allowed.
This is a good development, as it will be clear whether advice provided to customers is independent or not.
About PPS Investments:
PPS Investments, established in 2007, is part of the 76-year old PPS Group, South Africa’s largest multidisciplinary society of graduate professionals with around 200 000 members. PPS Investments offers a comprehensive range of competitive investment solutions designed to PPS Group is mutual financial services company and shares 100% of its profits with its members. Thus, when PPS members invest with PPS Investments, whether in its single- -manager funds or PPS Portfolios, qualifying members benefit from increased profits into the PPS Profit-Share Account.http://www.ppsinvestments.co.za/
DISCLAIMER: The information, opinions and any communication from PPS Investments, whether written, oral or implied are expressed in good faith and not intended as investment or financial advice, neither does it constitute an offer or solicitation in any manner. Furthermore, all information provided is of a general nature with no regard to the specific investment objectives, financial situation or particular needs of any person. It is recommended that investors first obtain appropriate legal, tax, investment, financial or other professional advice prior to acting upon such information. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from the PPS Investments. Commission and incentives may be paid and if so, would be included in the overall costs. Professional Provident Society Investments Proprietary Limited (39270) and Professional Provident Society Multi-Managers Proprietary Limited (28733) are both licensed financial services providers.