Share

Shake-up expected in financial advice industry

accreditation
(Shutterstock)
(Shutterstock)
Cape Town - The Retail Distribution Review (RDR) is expected to be one of the biggest shake-ups to hit the financial advice industry, according to Peter Gerson, business development manager of Yellowtail Business Solutions.

While it is aimed at improving the quality of investment advice given to consumers and improving consumers’ understanding of the advice, he said in reality it will likely squeeze unprepared financial advisors out of the market and potentially burden consumers with extra fees.

“RDR has already had a significant impact on Europe where on one hand we see major insurance businesses adopting technologies to analyse and better understand their consumer’s needs in relation to mortgages, life insurance and retirement plans," said Gerson.

"But on the other hand, those businesses that failed to adopt more consumer centric models resulted in a large reduction in the number of financial advisors."

Major finance and insurance companies will need to adapt their current business models to comply with the coming legislation, he said.

"Current practices where financial advice is heavily tied into commission based product sales has meant that financial advisors are selling products that suit their needs rather than tailoring products to consumer’s life needs," said Gerson.

"As the legislation is adopted in the coming months, commission based products will no longer exist."

Instead, commission is anticipated to be replaced by a model that sees consumers paying to receive tailored, individual financial advice.

The biggest challenge facing the industry is how to adapt current practices to comply with the new requirements.

"The key issue is whether South African banks and insurance business are ready and able to evolve," said Gerson.

Recent findings by CoreData Research South Africa showed that less than half of South African financial advisors are prepared for  changes that are likely to come from the RDR.

Of those surveyed, only 12.8% currently work on a fee-based model that would require no adjustment post-RDR.

Paying for advice

Another key issue though is will consumers be willing to pay for advice in the current form, said Gerson.

According to CoreData UK, the number of UK advisers dwindled down from 35 000 in 2010 to around 20 000 following RDR.

“Consumers are increasingly finance and tech savvy and are determined to have more control of their pensions and investments," said Gerson.

- Fin24

Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:

* Write a guest post
* Share a personal story
* Ask the experts

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.88
+0.3%
Rand - Pound
23.87
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders