Share this Mister Wong Digg Del.icio.us Slashdot Furl Yahoo Technorati Newsvine Googlize this Blinklist Facebook Wikio Hear this text Print E-mail Tags industry financial services cox brokers exam fais cost service consumer act leave forbes risk training qualifications term ensuring trained write Taryne Eastwood

FAIS Act set to improve consumer protection and professionalism in financial services industry

15 December 2009

2010 will see South African financial service providers up their game as the Financial Advisory and Intermediary Services Act’s Fit and Proper Determination takes effect. Issued in October 2008 the determination seeks to professionalise the industry within three years. Furthermore, a new notice from the Financial Services Board (FSB) on treating customers fairly seeks to reinforce FAIS’ existing consumer protection requirements.

The FAIS Act was promulgated in 2002 to protect the consumer and promote professionalism within the short-term commercial broking industry by ensuring that practitioners are properly trained and adequately experienced to serve the public as insurance brokers.

“This strict enforcement of the FAIS Act as it applies to broker (i.e. Representatives and Key Individuals) qualifications is set to radically alter the industry and the way brokers manage themselves and their employees” says Stuart Cox, Executive Leader, Alexander Forbes Risk Services (Pty) Limited.

The implications for financial service organisations are far reaching since all brokers in the industry will need to write Regulatory Exam Level 1 (RE 1) by the end of 2011 (there are no exemptions from this requirement) and Regulatory Exam Level 2 (RE 2) (unless exempted), by the end of 2013.

“Getting this right financially and logistically demands substantial planning and resource allocation” says Cox.

For example, Alexander Forbes Risk Services has over the last 12 months had to assess the qualifications and experience of all of its brokers, ensuring that anyone who falls short is brought up to speed and is compliant.

This assessment has made us realise that “the writing of RE 1 and RE 2 will impose substantial cost, time and management constraints on our business”, says Cox.  

It is estimated that each of the two exams will cost in the region of R750 per person plus require each person to be trained, take study leave, and then take off further time to write the exam.

“The direct cost of training and writing the examinations will be in the region of R 1,2m over the next three years. Add to this the indirect costs for the days that staff members are away on training and study leave, and the figure is substantially more”, says Cox.

In the long term though Cox believes the shake up and spend will be worth it as both the levels of professional advice and customer service will improve within the industry.

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