A“conundrum” is a complex and often difficult problem that is hard to solve. The main reason for this complex problem is that there are different stakeholders in financial service providers (FSPs), each with their own background, experience, focus, priorities and incentives, and therefore they have their own individual opinions about what compliance should look like and how compliance should be implemented in the engagement process. FSPs must solve this conundrum before the implementation of the Conduct of Financial Institutions (CoFI) Act because it poses a risk to businesses even right now, and CoFI will bring a few challenges of its own. Best to solve this age-old complex and difficult problem as soon as possible.
The objective of this article is to show how current compliance practices in the client engagement process may be seen as complex and challenging depending on which role you fulfil in your FSP, and to inspire FSPs to find a solution. Let us consider the “record of advice” for example and reflect on the perspectives of the various stakeholders in the FSP.
Advisors generally want a record of advice to be as short and simple as possible, because they want the business process as seamless and uncomplicated as possible with minimum administration. Even after 20 years of FAIS, some advisors still take shortcuts with their compliance documentation when submitting business.
The various stakeholders must collaborate to find a way to simplify compliance documentation.
- Compliance officers generally want the record of advice as comprehensive as possible, because they understand FSP obligations in terms of the various laws and the obligation to record transactions accurately. Compliance officers are paid to monitor compliance, and that is where their priorities are.
- Financial directors are typically focused on the numbers and managing revenue in the business.
- Some key individuals are focused on production rather than compliance and are reluctant to question representatives that take shortcuts because they bring in the business. Others understand their accountability in terms of the FAIS Act and they collaborate with compliance officers to respond responsibly and take ownership of their onerous designation.
- The CEO generally wants to find a sound balance between the various priorities because their income and FSP profits depend on advisors but at the same time they are the ones who must face the music when the FSCA and/or the Financial Intelligence Centre performs an audit on the FSP. The regulators are meticulous when it comes to these audits and there is zero tolerance for non-compliance. Responsible CEOs and key individuals know that.
- Shareholders are interested in profits. That is why they invested in the FSP in the first place.
The solution
The various stakeholders must collaborate to find a way to simplify compliance documentation and to integrate the various documents into the business process through the effective use of technology. There are very few FSPs in South Africa that have perfected the art of doing so, but it is possible. Some advisors still think compliance is the problem, but compliance is an integral part of the solution for the future. It is important now and it will be vital under CoFI. Collaboration between the various stakeholders is the key.
As we approach the promulgation and implementation of CoFI there are many FSPs that are positioning themselves to become a home for individuals in search of succession planning or simply to take away the burden of management and compliance. One of the most important components of the value proposition
