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Landmark SA report – Financial Advisers rising to the challenges – Nigel Sillitoe – CEO, Insight Discovery

‘Wherever you go in the world…there is far more regulation.’

SIKI MGABADELI: We are looking at the findings of an in-depth survey of South African independent financial advisers conducted by Insight Discovery, and we are speaking to the CEO, Nigel Sillitoe.
    Now the inaugural South African Panorama Investment Report seeks to answer two key questions: What do IFAs think about the ever-changing regulatory environment and what do IFAs want from the asset-management companies, platform operators and other financial services companies they deal with?
    So let’s speak to Nigel then. Nigel, thanks for your time this evening. Firstly, how was the survey conducted?

NIGEL SILLITOE: Thank you for seeing me. It was conducted through various research methodologies which included online, telephone interviews – and for the more executive managers of these businesses through face-to-face.

SIKI MGABADELI: What were some of the key findings, then?

NIGEL SILLITOE: Sure. There were quite a few. The key one, I think, and this is the most interesting, is that 97% – and there were 330 in total – thought that the FSB should do more to monitor unregulated schemes and products. There are about 10 key findings, but this was one that certainly stuck out. Ninety-seven percent is a very high number, of course.

SIKI MGABADELI: Did that surprise you? Recently the FSB actually put out a press release and many media companies in South Africa reported on it, where they said that there had been a rise in these unregulated Ponzi schemes and pyramid schemes and so on.

NIGEL SILLITOE: There have been. Unfortunately this is a worldwide trend, because we do a lot of surveys like this in different countries, typically Asia and the Middle East. So there have been quite a few Ponzi schemes and scams. I think personally in South Africa the number are far fewer. It’s always painful when investors are hurt by scams, but there has been far more regulation, particularly amongst advisers in South Africa, much longer than in actual fact in many developed countries around the world.

SIKI MGABADELI: The other key finding was that 60% of financial advisers say that changing regulations are the main challenge facing them.

NIGEL SILLITOE: Correct. And this is partly because there will be additional costs borne by the advisory firms, and obviously this will have to result in a business model changing. Remember, what’s been proposed will take a while to actually introduce. With this RDR review, there are six work streams at the moment, so there is a lot of consultation, so I doubt it will actually be introduced in maybe a year or two, which gives these IFA firms plenty of time to adapt.
    But the nice thing is that they are probably in a stronger position than, let’s say, advisers in the UK, where RDR was introduced a few years back, because you don’t have the global meltdown happening when RDR is being introduced in the UK, for example, which then led to a lot of people leaving the industry. I sense this won’t necessarily be repeated here in South Africa.

SIKI MGABADELI: And is there a sweep of regulatory changes happening around the world, or–

NIGEL SILLITOE: Oh gosh, a very good question. Around the world, in the past, particularly, when you look at emerging markets, there hasn’t been that much regulation, particularly between brokers and consumers. That’s all changing. So in the Middle East, for example, which is where I do a lot of research, there is very little regulation apart from in Qatar, where brokers are forced to reveal how much commission they are earning. Places like Hong Kong introduced limits for banning commissions. Singapore is doing the same. The UK has introduced already RDR – that was implemented a couple of years back. So wherever you go in the world, apart from some very small, unsophisticated markets, there is far more regulation – not just on financial advisers in general, but also among banks and insurance companies. We don’t want the regulation obviously to be too onerous because then that does put a lot of pressure on these independent financial advisers.

SIKI MGABADELI: All right, we’ll leave it there. Thanks, Nigel.

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