At the recent Glacier Invest Summit 2023 hybrid event, Anton Swanepoel, financial industry expert, author and director at Trusted Advisors, unpacked the Conduct of Financial Institutions (COFI) Bill and how advisers should prepare their minds and practices for this industry-changing legislation. “Build COFI into your practice, and not the other way around”, he says. “This means sharpening the fundamentals that you already have in place”. A key point of COFI is regarding the issue of suitable advice, and tied to that is knowing your client and determining their risk profile.
The COFI Bill is set to be tabled in Parliament before the 2024 national elections. Its aim is to incorporate (and consolidate) all of the principles of conduct held in the multiple pieces of legislation which currently govern the financial services sector. These include, amongst others, the Long-term Insurance Act, the Short-term Insurance Act, the Pension Funds Act and the Financial Advisory and Intermediary Services Act – more than 1,000 pages of legislation in total. In simple terms, COFI will create one standard of market conduct across the industry. Under COFI, one standard will exist for advisers, product suppliers, linked investment service providers, discretionary fund managers, and so forth.
Anton focuses on one of the six outcomes of Treating Customers Fairly – suitable advice – which is a key principle relating to COFI. One of the key factors within suitable advice is risk profiling, which many confuse with risk tolerance. Anton explains that advisers need to understand risk profiling very well and that it consists of three parts:
Each part plays a very important role in truly knowing the needs of your client, in your role as an adviser and in designing a financial and investment plan that serves them completely. These are established concepts and likely already incorporated in advisers’ practices, but with a slight tilt to focus explicitly on these concepts might be required.
Adopting COFI in your practice may require some tweaks in your practice, but probably not a complete overhaul. Here are six of Anton’s tips:
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