The first habit of highly successful FSPs under COFI

10 May, 2023.


The first responsibility of a leader is to define reality.

Max De Pree
American businessman


To say that financial services providers are under pressure would be a gross understatement. With the waves of regulatory reform that the industry has experienced over the last two decades, political instability, state capture, fraud, corruption, economic challenges, looting, Covid and loadshedding, financial advisers and intermediaries are facing yet another wave of legislation. In my opinion, the greatest challenge FSPs are going to face during the next few years is a lack of capacity to deal with all the regulatory changes that are coming in the midst of the perfect storm that is going on around us as South Africans.


With this series of newsletters, I am going to stand on the shoulders of a giant, the late Stephen R. Covey, author of many books, but most famously known for The Seven Habits of Highly Successful People


Be proactive!

Covey’s first habit is the habit of being proactive. Reactive people are driven by feelings, by circumstances, by conditions, by their environment, and they tend to wait until it is almost too late. I am afraid that, with all the variables that FSPs have to deal with, the lack of capacity to deal with everything at the same time may just be one of the main causes of business failure in the future. If we think back to 2004, it is safe to say that financial services providers were ill prepared. We were not ready for the implementation of the Financial Advisory and Intermediary Services Act. We have been given notice since 2002 when the Act was promulgated, but we were not ready. As an industry, there were only a handful of FSPs that were prepared for the changes. For the rest, we were reactive, and not ready. The myriad FAIS Ombud determinations against financial services providers in the beginning of the implementation of the FAIS Act offers some proof of this fact. Respectfully, even after almost 20 years of FAIS, many FSPs still struggle with the correct and consistent application of a Record of Advice.


In a few months the Conduct of Financial Institutions Bill will be promulgated, and the industry is given fair warning that this Bill is going to change the Regulatory landscape yet again. Is the industry prepared? I do not think so. However, in mitigation, currently there are so many things that are going on at the same time, that business owners and key individuals do not have the capacity to prepare properly for what is coming.


However, with COFI there is a wave of market conduct legislation building up that can potentially be devastating to many FSPs if business leaders do not take proactive steps to start planning for it. As the adage goes, failing to plan is planning to fail. Why plan proactively? It is simple. It is better to plan without being pressured to implement something quickly without proper consideration. We are already under pressure, and it will be better for us to brainstorm a COFI strategy properly before it comes into effect than to have gaps in our plans when it becomes law. That way we create capacity to deal with the changes. 


How to plan proactively?

Start to participate in our COFI conversations. It is not what happens to us, but our response to what happens to us that often hurts us. Become part of the Trusted Advisor community. Together we will be much stronger.