Are Financial Advisors ready for the new challenges?

The New Companies Act brings opportunity the Consumer Protection Act brings some additional strain whilst the proposed Protection of Private Information Bill will place additional strain on marketing methods and additional responsibility on database management within the financial services practice. This is a clear indication that 2010 and 2011 is going to be a very interesting time for financial advisors and business owners alike.

That said, I had to ask the question are Financial Advisors ready for these paramount changes and the opportunity and challenges that it holds. The extremely interesting part is in a quick survey, conducted with 40 companies that have attended the Sink or Swim Seminars, only about 15% of them had a active relationship with a financial advisors and most of these were merely related to pension funds and medical aids on not to any other business critical issues.

Even more over I was surprised that in a phone call to about 20 brokers only one offered business risk insurances, and I am not referring to asset insurance. Now the question I have is why don’t business owners have relationships with financial advisors and why don’t financial advisors focus on providing these key risk insurance instruments to their client base.

In recent years we have seen how the pendulum have swung in favour of the consumer and I have to wonder if Financial Advisors will now also be found wanting if their clients are not properly insured for these business critical risks. Never mind the massive opportunity that lies in this market segment.

Consumer Protection Bill and the Services indusrty

The Consumer Protection Bill will set the benchmark in responsible marketing for service providers in South Africa.

The consumer protection Act, due to be promulgated in October 2010 in South Africa, is aimed at setting a national benchmark for high standards of marketing and responsible sales and advertising. The act affords a myriad of protections to the consumer with a strong emphasis on the previously disadvantage participants that have been exploited by some business sectors.

Companies providing service to the public have to start now to get themselves in line with the new Act as the consequences of not being in line could be dire.

Just some important provisions in the act for service providers

• A contract would be interpreted in favour of the consumer, in the event of ambiguity allowing for more than one reasonable interpretation. Although this reflects the existing law, it is now an unalterable right.
• Any exclusion within the contract would be measured against whether a reasonable person in the position of the consumer would have expected such exclusion, taking into account the contract's contents, the manner in which it was presented and the circumstances around concluding it. Contract exclusions must to be drawn to the consumer's attention.
• Service Providers will not be allowed to take advantage of the fact that the consumer is unable to understand the terms of the contract being concluded with it as a result of either physical or mental disability, illiteracy, ignorance or inability to understand the language of the contract.
• The Terms of the contract may be ruled as unfair, unjust or unreasonable if they are excessively one sided, contain terms so adverse to the service provider as to be inequitable, or if the consumer was misled by the service provider company.
  The terms of the contract must be in writing and in plain language (see definition of plain language at bottom).
  

In conclusion, the New Companies Act places a huge responsibility on service providers to act responsibly with there consumers and to ensure that all contracts are easily understandable and properly explained.

To find out more about the New Consumer Protection Act visit www.sinkorswim.co.za for seminar dates.

Plain Language – In essence plain language means that you should write documents (advertising or other) in such a manner that it can be understood by the lowest potential target market.