Speaking at the Momentum Risk Summit this week, the FSB’s deputy executive officer, Caroline da Silva said the watchdog recognises the need to push ahead with the RDR system to ensure that customers are treated fairly.
“We want RDR to shape an environment that ensures that fair and affordable advice is available to all and in order to ensure that we have to make sure that advisers are sustainable and that advice is sustainable.”
Modelled on the UK’s RDR framework, the FSB released its latest draft of the Financial Sector Regulation (FSR) Bill in October 2015. The legislation proposes replacing the current commission system with a fee-based model similar to the UK.
The document, which laid out 14 proposals as part of the first phase of RDR, was expected to be implemented this month however due to delays over the FSR and the Insurance Bill, it has reportedly been postponed until early next year.
The regulator confirmed to International Adviser that the introduction of the FSR Bill will create a “Twin Peaks” model of financial sector regulation, with the FSB restructuring as the Financial Sector Conduct Authority (FSCA).
“We want RDR to shape an environment that ensures that fair and affordable advice is available."
The rebrand will mirror the UK’s Financial Services Authority (FSA), which transformed into the Financial Conduct Authority (FCA) in 2012 following the implementation of the Financial Service Act.
Like the FCA, the FSB also plans to shift all of its prudential work on to the Prudential Authority at the country’s Reserve Bank.
Concerns over RDR
Craig Featherby, the group managing director of South African advisory firm Carrick Wealth, previously told International Adviser that he expected delays to the introduction of RDR, highlighting key concerns over exactly how it will be implemented.
"Legislation, whilst mostly well intended in South Africa has the tendency to be delayed and sometimes poorly implemented," he said on Wednesday morning.
In May, Featherby questioned whether the FSB would phase in the new system or apply it to the whole market and whether commission and RDR would work "side-by-side".
Acknowledging that although the reforms are likely to increase retail offerings and simplify the retirement savings environment, like many critics of the UK’s RDR system, he believes the new rules will create an ‘advice gap’ for those on moderate incomes looking to invest.
Getting rid of commission will shrink South Africa’s IFA market and reduce competition for consumers, he warned, predicting that Carrick and other “big players” will buy out smaller firms struggling to adjust to the new model – a trend seen in the UK after RDR was introduced in 2012.