The impact of regulatory changes in the insurance industry on financial planners in KwaZulu-Natal.

Abstract

Prior to the FAIS Act there was limited legislation that governed the conduct of Financial Planners (FPs), especially with regard to the furnishing of advice. This meant that anyone, irrespective of qualifications, knowledge or skills was able to give advice. Considering the complex nature of financial products and the lack of financial literacy amongst the public, this situation on occasion resulted in irregular business practice. FP’s who lacked the requisite knowledge and skills were giving advice to clients that often did not constitute “best” advice for the client. This lead to clients being advised on and sold inappropriate products that did not meet their financial needs and sometimes resulted in clients suffering financial hardships. The purpose of the study is to provide leaders of industry with insight into how regulatory changes are impacting the FP’s and the industry and how Financial Planners are adapting to this evolving regulatory landscape. Armed with the findings of the survey Financial Planners will be better equipped to propose changes to the regulator if such are necessary. A quantitative research approach was adopted. Primary data was collected by means of a structured questionnaire consisting of twenty-two close ended questions. Eighty respondents were approached using the drop and collect method of data collection with sixty seven respondents choosing to respond. The literature review revealed that regulation should be an evolving process and responsive to changes in the environment. In a rapidly changing market environment traditional views about financial regulation should be subject to scrutiny and challenge. It should never be taken as axiomatic that regulation is always efficient and effective and precisely related to its alleged objectives. If the ultimate purpose of regulation is to protect the consumer and serve systematic interests then it should be subjected to the test of whether it does so effectively and cost efficiently. The study has revealed that regulatory changes have impacted Financial Planners in a positive manner. The image of the Insurance Industry in South Africa has improved because of regulatory changes and client confidence in Financial Planners has increased. Regulatory changes have succeeded in professionalising the Insurance Industry in South Africa.