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.