Financial services companies that offer financial advisers significant cash lump sums, often in the millions of rands, and other incentives, such as share options, to switch employers, often to the detriment of consumers, are in the firing line of the regulator, the Financial Services Board (FSB).
The FSB's recently published draft regulations aim to strictly control conflict-of-interest situations where the interests of consumers are placed below those of, for example, financial product providers and their sales forces.
The regulations are due to be partially implemented in October this year, with the full force of the regulations in place by April next year. But Gerry Anderson, FSB deputy executive in charge of market conduct, warns that even now financial advisers should tread wearily, because the financial advice ombud will take the payment of incentives into account when making determinations on advice issues.
Incentive packages for independent advisers and representatives often come with tough sales targets that are seen as a major cause of the product-switching (known in the industry as "churn") scourge undermining the wealth of individuals.
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