The role of the organization

1. The role of the organization “QUO VADIS TUSSENGANGER?” / “QUO VADIS INTERMEDIARY?” Presented by: Justus van Pletzen

2. REALITIES • Regulation • Commoditisation – Consumerism • Value of the intermediary (lack – perception) • Image and Reputation • Wfii • IAIS • Core principles 18/24

3. The three strategic pillars

4. COMMUNICATION (HOW) • Technology • New Connect • Daily • Weekly – Indaba • Monthly – Inform • Selective – What is relevant for me • One consistent message through structures • Regional Coordinators • Branches • Regional Conferences

5. REPRESENTATION (WHAT) Threats (Reality or Perception) • October 2004 (FAIS) • 14700 FSPs • July 2012 • 10750 FSPs • 3206 Cancelled • Consolidation • Retire/ Leave the industry • Fraud (minority)

6. REPRESENTATION (WHAT) • New entrants (Human Capital Initiative • Level playing fields • Direct • Aggregators • Economy (Section 8) • Banks (One fits all) • FAIS Ombud determinations (Due diligence) • COSTS…………… • Image and Reputation • Remuneration • Education – (In general) • Transformation

7. TWIN PEAKS • National Treasury - Prudential • FSB – Conduct • CMS • Inseta • SAM • TCF • FSGLAB • Binder Regulations

8. RECENT SUCCESSES • Binder agreements • RE Level 1 exams • RE Level 2 exams • Health Care fees • Human Capital Project • Code of Conduct • FIA Members are informed • Broker mandates – direct • FSGLAB • Value of the intermediary (FIA) • President of Wfii • Exco member of Wfii • FIA Awards • Pro-intermediary Campaign

9. CHALLENGES • Capacity to represent all disciplines in the industry • Our own worst enemy • Trust the leaders you elect and believe in them

10. Member priorities

11. PRODUCT LIFE STAGES APPROACH TO TREATING CUSTOMERS FAIRLY (TCF)

12. FSA (UK) The FSA began studying the TFC programme in 2000, published its first paper in 2001, and the programme was officially launched in 2005. Realties in the UK: A change of mindset of the industry Clarity of regulatory expectations Education to encourage consumer responsibility A supervisory approach that is pre-emptive and intensive Enforcement and compliance

13. Product life cycle Cultural Framework

14. Desired Outcomes Developing products for specific target markets, based on a clear understanding of the likely needs and financial capability of each group of customers

15. Desired Outcomes Marketing products for specific target markets, based on a clear understanding of the likely needs and financial capability of each group of customers Communicating clearly and fairly the nature of the product before the consumer is “locked in”.

16. Desired Outcomes Balancing the commercial objective of increasing sales with the objectives of Treating customers fairly. With assessment, offering suitable alternatives to consumers.

17. Desired Outcomes Providing clear and appropriate information, making charges transparent. Being clear to customers about what the firm, its products and services offer.

18. Desired Outcomes Monitoring and responding appropriately to changes in the wider environment that may affect products and impact on particular classes of new or existing customers.

19. Desired Outcomes Honouring representations, assurances and promises that lead to legitimate customer expectations. Identifying common underlying causes of complaints and taking action to eliminate the root cause.

20. Culture Change: Six Key Drivers • Leadership • Strategy • Decision making • Controls • Recruitment, training and competence • Reward

21. FSB’s TCF initiative • FSB published a TCF discussion paper at the end of April 2010 which introduces TCF concept and contextualises it by dealing with specific examples • Stakeholder workshops to debate TCF • Cross-sectoral task team • External consultant • FSA Stakeholder Workshop • Considering comments received

22. Key elements • Culture Change • Fair treatment at the heart of company’s business • NOT a compliance function • Ownership of TCF should rest at Board and Senior Management level • Board/Senior Management must embed culture of TCF at all levels of organisation • Further guidance on TCF culture framework and a self-assessment tool will be published

23. Key elements • Revisiting the regulatory framework • Challenges of rules based approach vs outcomes based approach to regulation • Combination of rules/principles in regulation so that the ‘spirit’ of what the regulator wants to achieve is made clear • Gap analysis of legislation of FSB to determine if all elements of TCF are adequately covered and to ensure alignment across sectors. • Guidance notes on TCF best practice will be published

24. Key elements • Revisiting the supervisory approach to market conduct • Reactive approach vs proactive approach • Increased focus on thematic on-site visits / testing of outcomes on the ground (for instance by way of mystery shopping) • Creating the right incentives • Relying on financial institution to do the right thing : TCF not likely to succeed • Visible enforcement of TCF principles, increased probability of detection, higher cost of non-compliance (steep penalties) • Enforcement Committee • Other forms of redress

25. Key elements • Consumer Education and Co-ordination with Ombuds • Consumers also have a responsibility to understand rights/obligations • TCF and Consumer Education must go hand in hand – - Asymmetry of information - Generally complex nature of financial products - Consumer Education Department

26. Next Steps • Roadmap document • Evaluation of comments and setting out what FSB will do next and how • Published by year-end • Self-assessment pack • Briefing document • Self-assessment tool • Initial focus on product providers • Piloted process, published for industry to use • Benchmark study • Survey of firms based on self-assessment tool • Interviews with firms • Publication of assessment and report • Supervisory Gap Sub Committee • Regulatory Gap Sub Committee

27. Conclusion • TCF aims to elevate fair treatment of consumers on agendas of financial institutions. • Behavioural change will be a multiyear project • After consideration of comments on discussion paper- • Issuance of more detailed guidance on what the FSB expects of firms in applying TCF. • Obligation will be on Board/Senior Management to undertake a TCF self-assessment

28. Thank you