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Dear Readers

We have not communicated for quite some time. Winter is almost at it's end and spring is about to bloom.

As the season are about to change and bring us warmer wether and hope fully lots of rain for our farmers, there are a number of challenges and changes in the financial services environment. In the next few newsletters I want to specifically focus on some of these changes and how this will impact on you as the consumer.

The first of these events are the changes in the remuneration of the financial advisor.


ARE YOU READY FOR FEE BASED FINANCIAL ADVISE?

I think this is a fair questions since the Financial Services Board (FSB) are pushing hard for this. There is talk of implementation during 2014. How will this affect you, the consumer of these financial services?

I found an interesting article from the investsa.co.za website:

Product commission ban could have serious repercussions

June 24, 2013

South African financial advisers are currently facing the biggest risk to their businesses if remuneration legislation is overhauled and could stand to lose up to 43% of their incomes, according to a new survey by CoreData Research.

Around 9,775 South African advisers do not currently use a fee-based model. The Financial Services Board (FSB) is in the process of a ‘Remuneration Distribution Review’ and the industry is likely to see a ban on certain product commissions sooner than it expects.

CoreData Research stated: “The uncertainty of where and how their next pay check will come from is a nagging concern for many and advisers are considering the best course of action going forward. For some this means targeting more profitable clients, improving cash flow or executing a leaner structure.

“Many advisers feel they will need or intend to focus on the ‘big ticket’ clients post-review, however, there are only so many golden tickets around – the percentage of advisers that currently manage average accounts of over R1m is less than half of the industry.”

Currently, mass market clients with R5000 to R500,000 in assets make up 36.3% of adviser clientele – it is this lower income segment that is most likely to be adversely affected by upfront fees which they may not be able to afford, while some mass affluent investors may be more inclined to pay upfront fees.

This study reveals that despite the fact that almost 60% of the industry admitted this change in fee regulation will be the biggest challenge they face over the next two years, only around half of advisers are actually aware they may need to change their business models and feel that explicit fees will need to be agreed upon with the client going forward.

Of the approximate 11,500 advisers registered with the FSB, only 2,300 indicated they are actively starting to make these changes and modifying their fee structure as a result

Please be so kind as to partake in a short survey on our website about what you thoughts are regarding this issue. Also email us on your views. Are you in favour of a fee based advise service or are you more comfortable paying commisiion or would you rather preferre a combination.

Go to Survey: