Default Regulations: The industry has struggled
After two years of encouraging industry compliance, 1 March has come and gone and the industry has mostly complied with the Default Regulations implemented by the Financial Sector Conduct Authority (FSCA).
At a recent media roundtable, which was hosted by Sanlam Employee Benefits, Jocelyn Hathaway – CEO of Sanlam EB – reported that the industry is at a cross roads and much more needs to be done to ensure compliance that truly benefits the client.
“There is a real opportunity for funds to engage in introspection, innovation and impact. Adhering to Default Regulations may prove challenging for certain funds. However, they can really make a significant impact in the lives of their clients,” said Hathaway.
One of the significant debates during the lead up to the Default Regulations final compliance date was whether funds would be engaging in a tick box approach or an approach that would bring about meaningful change.
“We were faced with this debate and it stimulated Sanlam EB to really reconsider its operating model. Our purpose has always been to enable financial resilience to our clients, and this should be the focus of every fund in the industry. If a fund is adopting a tick box approach at present, it does not mean that this will forever be the case. Funds can move towards innovation,” said Hathaway.
Returning a potent serve
The FSCA really shocked the industry when it implemented the Default Regulations in 2015, and certain funds were caught napping while they dragged their feet when it came to compliance. Now the time has come for a change in focus.
“Funds should now be fully compliant with the Default Regulations. The onus is on the FSCA to monitor the impact of the implementations and hold trustees accountable for their actions where nessesary,” said Hathaway.
Some of the impacts of these implementations include:
a renewed focus on annuities;
reduced admin, investment and advice costs,
a sharpened focus on product development, particularly when it comes to annuities; and
a sharpened focus on the provision of advice and counselling.
“One of the significant changes that we have seen coming from the implementation of the Default Regulations is that umbrella funds have become a very popular alternative,” said Hathaway.
Retirement benefits counselling
An important feature that needs to be focused on when it comes to the Default Regulations is retirement benefits counselling.
The FAnews previously published a newsletter regarding the Default Regulations where it was pointed out that retirement benefits counselling would be an area where funds would have the most room to become very creative.
However, this has proven to be a non-event.
“What we have seen, post Default Regulation compliance date, is that written counselling is proving to be the most popular form of counselling in the industry. This could prove to be ineffective in some cases as funds are unable to monitor and track the impact that this communication is having on members,” said Hathaway.
Innovation can be found
The fact that written communication is proving to be popular in the industry does not mean that there is no innovation within the industry.
Hathaway pointed out that many funds have introduced innovative approaches to retirement benefits counselling that is not written based communication. In these cases, Hathaway pointed out that funds have appointed advice partners who assist members at retirement. Funds have negotiated fees with these advice partners which are paid by the funds and not the members.
Salaried advisers have made an impact on the industry and will continue to make an impact going forward. In a world where certain advisers are concerned about their relevance to clients, this is a perfect opportunity to demonstrate value.
Editor’s Thoughts: While value means different things to different people, an industry standard should be established. From there, funds should be working to go above and beyond this standard. This is how trust is encouraged. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts email@example.com.
Article published courtesy of FANews https://www.fanews.co.za/article/views-letters-interviews-comments/18/all/1102/default-regulations-the-industry-has-struggled/26798