“Often changes to legislation are seen as more of a threat than an opportunity,” said Lindsay Bateman during an interview with International Adviser. “But knowledge of the UK can help firms profit from the changes.”
He warned that costs will mount for both providers and IFAs as firms adjust their products, marketing, documentation and training structures when the country’s retail distribution review (RDR) lands next year.
Bateman said, like the UK, those early adopters of the new standards will thrive.
Cost implications
“As with any regulation, there will be unintended consequences,” he said. “Typically there are cost implications, and that’s on the back of a fairly lengthy period of regulatory change.
"Advisers are given more time to get to grips with increased academic and professional qualification requirements to ensure people are not locked out of the industry"
“But once we are over the hurdle of that change, then the benefits will start to come through.”
Bateman emphasised that RDR is an opportunity for fund houses to examine product design: “It is important that asset managers create, deliver and manage products which are transparent for the underlying clients and for the advisers.
Open and clear
“It can only be in the interest of the asset management industry to ensure that its reputation is enhanced by being open and clear about products, pricing and risk.”
He suggested South Africa’s financial services industry escaped much of the criticism associated with developed markets like the UK, the US and Europe because it is significantly less complex.
“South Africa hasn’t reacted as quickly because they haven’t needed to react as quickly, but they are certainly taking the same issues very seriously.”
One of the issues that emerged on the back of the UK RDR was the ‘advice gap’, which Bateman said asset managers are always mindful of.
Skill shortage
He said South Africa also suffered from a slight skill shortage in terms of the number of advisers, but argued that the country’s existing local regulation and requirements mean most financial advice is of a high standard.
“In South Africa, advisers are given more time to get to grips with increased academic and professional qualification requirements to ensure people are not locked out of the industry. Advisers can work under supervision and learn on the job.
“There is a more prescriptive requirement in the UK in terms of the experience and qualifications advisers need before talking to clients.”
Two-way dialogue
Bateman said South Africa’s regulator, the Financial Services Board, is reactive when engaging with the industry, particularly when giving the industry time to discuss the proposals.
“This is an opportunity to shape and enhance the quality of the final result because it offers this two-way dialogue between the regulator and those working in the industry day-in day-out.“
The downside is it can slow things down because there is more discussion taking place.”
In May, Brooks Macdonald International won a licence which allows it to distribute discretionary portfolios in South Africa.
