South Africa’s financial advice industry is entering a period of significant regulatory transformation as the Conduct of Financial Institutions (COFI) Bill moves closer to enactment, with industry leaders warning that traditional compliance approaches will no longer be sufficient in a rapidly evolving, outcomes-driven environment.
The industry is moving decisively towards a model that places greater emphasis on risk management, customer outcomes and professional accountability. Risk management must now be understood as central to how financial services providers operate and deliver value to customers. In the past, compliance was treated as something you did because you had to.
It was very black and white and largely seen as a defensive requirement just to maintain your licence. That approach is no longer sufficient. Risk management has become a core part of how you run a sustainable advice business.
The COFI Bill is expected to accelerate a broader regulatory shift towards outcomes-based supervision, where firms are assessed not only on compliance, but on their position along a spectrum of risk management maturity and customer outcome delivery. This marks a departure from traditional binary compliance models.
The stronger your risk management practices and customer outcomes, the lighter the regulatory touch will be. The weaker your position, the more intensive the oversight becomes. This approach is closely aligned with the regulator’s increasing focus on protecting consumers and ensuring that financial services firms can demonstrate sustainable and fair outcomes in practice, rather than simply in documentation.
One of the most notable changes emerging from this shift is the way in which advisors are beginning to reposition risk management as part of their customer value proposition, rather than purely an internal governance requirement.
Leading advisors are already incorporating risk considerations into customer conversations in a way that enhances trust and clarity. Good advisors are embedding it into the value they offer customers. They explain continuity of service, professional indemnity cover, succession planning and the safeguards that ensure customers are protected even if something happens to the advisor.
This strategy helps customers understand that the value of advice is not only in investment recommendations, for example, but also in the structures that support long-term security and consistency. A key area of focus under the evolving regulatory environment is the quality of advice documentation, which remains central to demonstrating that suitable advice has been provided.
While advice practices may technically meet legislative requirements, the quality and consistency of advice records often remain a concern. There is a big difference between ticking a box and capturing what was discussed in a meaningful way. Too often we see standardised wording being used across multiple customers, which does not reflect the individual nature of advice conversations.
In the event of disputes, regulators and ombud processes rely heavily on written records to determine whether appropriate advice was given. If it is not properly recorded, it becomes very difficult to defend the interaction, regardless of what was said at the time.
Despite technological advancements and the evolving regulatory environment, accountability remains with the professional advisor. You cannot delegate accountability. Even if technology assists in the process, the advisor must be able to stand behind the advice given and demonstrate that it is appropriate for the customer.
Client dissatisfaction does not automatically indicate poor advice. A customer being unhappy does not necessarily mean the outcome was wrong. Sometimes it is about expectations rather than the quality of advice, and that distinction is important when assessing outcomes objectively.
The implementation of the COFI Bill should ultimately strengthen the financial advice profession by improving consistency, accountability and customer trust. The transition will require adjustment across the industry, but the long-term impact is likely to be positive for both advisors and customers.
If advisors genuinely engage with risk management and outcomes-based thinking, the industry will become stronger and more trusted. Customers will ultimately benefit from better aligned and fit-for-purpose advice. The COFI Bill is expected to be enacted later this year, marking one of the most significant regulatory developments in South Africa’s financial services sector in recent years.
