Twin Peaks

The FSR Act (Financial Services regulations Act 0f 2017) changes to the FAIS Act and amendments that were required for a number of our financial services acts have resulted in a changed environment and new Fit and Proper requirements for representatives, key individuals and financial service providers.
A huge change is the “Twin Peaks” model which has changed the focus and duties of the FSB who have now become the FSCA and the SA Reserve Bank who now control and administer financial services in SA.
The SA Reserve bank will eventually control the financial compliance of all financial institutions in SA after a phase-in period.  They used to control banks but will eventually control financial compliance for Banks, Insurance, Investments, Pensions, Health funding etc.
The new FSCA is responsible for accreditation for all financial services practitioners and is responsible for
market conduct in the financial services sector.

Fit and Proper

These are set out in the Board Notice 194 of 2017 and while these differ for various classes and license areas
the requirements for a financial adviser, representative and financial service provider who is general practitioner financial adviser would be as follows:
Ethical requirement – you are no longer ethically “fit and proper” if you:
  • Break a relevant law or regulations
  • Do not comply with the  general code of conduct
  • Bring the industry into disrepute
  • Mislead the regulator

Product Knowledge – before selling the product of any product provider the representative needs to attend and be assessed as competent in the companies products. This must be completed before the adviser deals with any client at the start of their training

Class of Businesses Training – before providing any advice to any client an adviser needs to attend and pass training on the generic products and the environment in the various classes of business the adviser is licensed to provide advice for.  This includes:

  1. Short-term Personal Lines
  2. Short term COmmercial Lines
  3. Long-term Insurance and private pensions
  4. Short and Long-term Bank Deposits
  5. Investment and CIS
  6. Advanced Investments
  7. Health Funding and Medical Aids
CoB must also be done before the representative provides any advice to a client.  This training must be done by a registered training provider. RSC is a registered training provider and will provide this training.

Acceptable Qualification – The FSB issued a list of acceptable qualifications but the FSCA realised they are not the experts in this area and in future the various professional bodies will update this list by evaluating various qualifications against the needs of the industry for specialists in the following areas. These include but would not be limited to:

  • Financial Advice and planning – FPI
  • Insurance sales and administration – IISA
  • Insurance Underwriting – IISA
  • Advanced Investments – FPI and SAIFM
  • Compliance – Compiance Institute
New qualifications will have to be approved by the above professional bodies as relevant in the different speciality areas.
Regulatory Examination – all advisers and key individuals must complete an examination of rules, regulations and legislation relating to compliance in the financial services industry. This must be done within 2 years of DOFA or the date they were first accredited by the FSCA or put onto an FSP register.
There are a range of exams for different players in the industry but the two we focus on are RE 1 for key Individuals and FSP and the RE 5 for representatives
Time under supervision – the adviser who is working through the above training and development plan would be working under the supervision of a manager who needs to check and sign off on any advice given by this adviser. The various licence areas have different time requirements that are required depending on the complexity of the products sold and the advice being given.
  • Short term insurance personal lines advisers must work under supervision for at least 1 year
  • Short tern=m deposit advisers must work under supervision for at least 1 year
  • Short-term commercial lines advisers are required to work for 2 tears under supervision
  • Long-term Cat C advisers are required to work for 2 tears under supervision
The maximum time allowed under supervision is 5 years +1 year if required but an adviser in long-term insurance  who has completed the above training and completed 2 years under supervision is now “fot and proper”
CPD or Continuing Professional Development – the above adviser, KI or FSP must now embark on an ongoing requirement to achieve 17 credits per annum on a three-year cycle, if this is not achieved then the individual would be debarred.  The FSCA is also looking to the professional bodies to accredit providers and acceptable events or activities that can be used for CPD requirements, and the credits each event or activity will create. CPD can be achieved by reading, researching, attending presentations or seminars, attending online training or webinars. The professional bodies will also provide record keeping for these activities.

RSC Offering

RSC offers training for the regulatory exams for:
  • RE1 for Key Individuals
  • RE5 for representatives
There is more information on our website
This is offered in one of 3 ways:
  • Self Study – we make the INSETA reading material and PDF of the relevant legislation available to any RSC learners at no cost and this is available on our website.
  • Facilitated and/or guidance on writing these exams provided in class for 6 or more learners at R1000 for a 2 day workshop OR on a one to one coaching session at R500 per hour.
  • eLearning will be available end of August 2018 for RE1 and 5 at R550 per learner. This will include video lectures and online practice exams to help prepare for the RE exam with Moonstone. We do not offer the exam as Moonstone is currently the only accredited examiner for RE.
We offer the NC wealth management SAQA ID 57608 in 3 skills programs and with the new requirements for class of business training and CBD becoming a requirement, I believe new entrants to the industry should attend these learning the following order. RSC is incorporating this training into the skills programs and qualifications we offer and a training and development plan would be as follows:
  1. Product Knowledge – usually provided by company or product providers
  2. Class of Business training would be done at the same time and provides context to understand the generic products in your area and would ensure you understand the strengths and weaknesses of the various products your client could use. We would complete the Class of Business Exam for CAT C( Life Insurance and Personal Pensions) and provide a letter for Complaince confirming learner has completed this required FAIS assessment.
  3. Skills Program 1 Environment which provides 41 credits in legal, regulatory environment and provides and insight into Current Affairs and Financial Services Environment
  4. On completion of this module usually 4 months into the program I would recommend completion of the RE for representatives as this is required to be completed in the first two years after DOFA.
  5. Write external RE through Moonstone.
  6. Skills Program 2 Risk management and FNA to complete the core and fundamental knowledge required for this qualification. This would provide a further 50 credits to the above from SP 1
  7. Complete the training and write the exam for the Class Of Business Training for Investments prior to attending the thrived and third and final module  for the NC Wealth management qualification.  Learner could also complete any other specialised CoB if required – Health, Short term, Pensions and Group Benefits
  8. Skills program 3 Wealth Management to complete the qualification 45 credits which covers retirement, investments and estates to complete the generic wealth management qualification.
  9. After 2 years in the industry this learner is now full “fit and proper “ and is not working under supervision and is required to complete CPD or continuing professional development which needs to be completed and recorded for the adviser to stay fit and proper.  The above adviser would need about 17 credits per year over a 3 year cycle and if this is not done the Representitive could be debarred. This will include:
    1. Attending lectures that are credit bearing
    2. Reading journals and completing assessments to provide knowledge acquired
    3. Short programs in specialist financial advice areas:
      1. Business Insurance
      2. Estates
      3. Investments
      4. Health
      5. Pensions
See RSC website for details of existing programs or as a new program is launched.
RSC will be offering the new QCTO programs that were developed by INSETA to replace the existing qualification and these should be available early next year once they have completed the SAQA accreditation and registration process.
The above plan will get you to and keep you “fit and proper” as an adviser but what then…

Adviser to Planner

The above ADVISER  would be “fit and proper” if you maintained the above CBD and I do not believe you will be required by the FSCA to increase your level to 6 or above unless you wanted to become involved in advanced investments or to become a FINANCIAL PLANNER.
The new regulations do not allow the representative to call themselves a financial planner unless you do financial planning as opposed to providing advice on individual products.  You also need to belong to a professional body and be registered as a financial planner. Currently, the only way to do this is to achieve a postgraduate qualification in financial planning and then become a CFP or Certified Financial Planner through the FPI(Financial Planning Institute)
To become a PLANNER you would need to either:
  1. Complete a level 6 program in financial advice and introduction to financial planning – these occupational  programs have been developed and are being registered at the moment and you could start on one of these early next year. Or could attend a specialised B.Com Degree program with various universities or Milpark
  2. Complete a level 7 program which is available through various universities
  3. Enrol for a Post Graduate in FInancial Planning and on completion write the FPI board exam and become a financial planner.
Enrol for the RPL option offered by some of the universities to gain entry to Post Graduate at level 8 and the CFP board exams by either
  1. Using your current level 5 program and your experience as a financial adviser to attempt the RPL process, but this is very difficult if you have not developed the required practical skills and these were not a requirements when you completed the level 5 qualification.
  2. Complete the level 6 occupational qualification which will teach the calculation skills and other practical skills required in the RPL process to succeed, and then to complete the RPL and enrol for post graduate in financial planning and CFP board exams.
Hope this provides some guidance and answers to your questions.