RDR UPDATE – ADVISER CLASSES
Just like with the Corona virus we are currently experiencing, prevention is better than cure in your financial services practice as a financial advisor. In this Blog Post we take a look at the new RDR (Retail Distribution Review) updates affecting the naming conventions of financial advisors that came out in December 2019.
It is important to note that the RDR proposals are at stage 3 out of a possible 6. Stage 3 means “informal stakeholder consultation and/or technical work at an advanced stage”. Thus, the specifics of around the classes and impacts around it are still suggestions and will likely look different in the implementation stage. My bet is it will take more than a year to implement. Given the Coronavirus issue it might delay it further. Time will tell.
Two Classes
Essentially there will be two classes:
PSA = Product Supplier Agent
This is a person tied to a specific product supplier only. They may only sell their products. They are not allowed to opine or advise on other products in the market and are more subjective.
RFA = Registered Financial Advisor
This designation is for independent financial advisors. They can advise on other products in the market and can take a more objective stance.
The above designations are for registration purposes only and client facing designations are still being deliberated on. The FSCA stated that one can only be one of the above designations and not both but space will be made for minimal exemptions.
Other Impacts
Advisers will not be allowed to be on more than one licsence – with some exceptions. This does not apply to KI’s.
Juristic Representatives to be allowed to continue but the FSCA wants more compliance and oversight on them. There are currently over 4000 juristic representatives and 10000+ FSP’s.
No commission can be transferred if a PSA changes to being a RFA and vice versa. RFA’s can transfer commission from one FSP to another if it is not a Product Supplier.
Commission can only be paid out for services rendered and ongoing commission only where ongoing services are in fact, rendered.
PSA’s must refer clients away that want a product type which the Product Provider does not have. Referral fees can be paid with this referral, so there is an opportunity for Product Suppliers and independent advisers to partner in this regard.
PSA’s are not allowed to use the word “Independent” and one can also not use the term if you are owned or if you own a stake in a Product Supplier directly.
There is a proposal that only CFP’s are allowed to use the term Financial Planning, Financial Planner. However, I expect this to be opposed as most advisers use this terminology and I think it would be unfair and confusing to clients. The designation of being a CFP should be enough to show clients that you’ve attained the certification. If you do not agree, I’d like to hear your thoughts in the comments on the matter. I am open to changing my mind if the argument makes sense.
For more information see the Discussion Paper from the FSCA here:
https://www.fsca.co.za/Regulatory%20Frameworks/Pages/Treating-customers-fairly.aspx
