Financial advisers who don't yet have the first 30 credits they need to comply with the Financial Advisory and Intermediary Services (FAIS) Act, have until May 5 to register for an Intec School of Insurance course which will prepare them for the crucial exams that they must write in order to obtain these credits by October.
The FAIS Act was introduced to regulate the financial advice industry in South Africa and to ensure that financial service providers are qualified to offer appropriate advice to consumers.
September 30, 2004 was the first important deadline for advisers and intermediaries since the introduction of the Act. By this date, all financial services providers had to apply for registration to the Financial Services Board (FSB), the regulator responsible for implementing and monitoring the FAIS Act.
The second important deadline - September 30, 2006 - is fast approaching. In terms of regulations under the FAIS Act, certain advisers and intermediaries have until this time to obtain knowledge and skills in order to be regarded as fit and proper to give professional advice and to keep their licences.
In terms of the FAIS Act, advisers and intermediaries have to obtain a certain minimum number of approved knowledge-based credits within the specified time frame.
Some of those who wrote the once-off assessments in the first quarter of 2004 have already obtained some or all of the credits required. Those who have not, can do so through a number of accredited learning institutions throughout South Africa.
The minimum number of credits that financial advisers and intermediaries are required to obtain before the deadlines depends on the nature of advice or the intermediary service they are providing. But the Act requires that all advisers and intermediaries either obtain a further 30 credits within two years of being licensed or a further 60 credits within three years of being licensed.
Research has shown that the cost and time are key reasons delaying advisers to get started with FAIS training, says Nikki Wouterse, the chief executive officer of ICG Learning Solutions, the division of International Colleges Group working with Intec to offer learning solutions in response to government initiatives to upgrade national skills.
There is also reluctance among advisers who have been in the industry for a long time to go back to being a student.
Intec School of Insurance encourages such advisers to take up the challenge. The company has achieved an excellent pass rate in their 2005 exams and offers support to advisers including tele-tutoring, facilitation sessions and personalised feedback on assignments.
Comply or face the music
Financial advisers cannot afford not to be FAIS compliant, as the consequences of non-compliance with the Act are serious.
Non-compliance constitutes a statutory criminal offence, says Warren Neale, the manager of FAIS registrations at the FSB.
The Act sets maximum penalties, which can be imposed for contravention of the provisions of the Act. Section 36 of the Act determines penalties for contravention with the maximum penalty set at R1 000 000 and/or 10 years' imprisonment.
In addition, the Ombud for Financial Services Providers can also make awards in favour of aggrieved clients to a maximum of R800 000. Such complaints can be channelled through the office of the Ombud for Financial Services Providers, which is an independent body established to handle consumer complaints regarding financial services providers.
This makes the message very clear: get FAIS compliant, including ensuring you have the correct training, or make alternative career plans. The risk is too high to operate outside of the law.
Who needs to comply?
FAIS registration and training efforts to date have largely focused on financial advisers. However, according to the FSB, every person who renders advice or performs an intermediary service in relation to a defined financial product is required to be authorised in terms of the Act.
Put simply, this includes any person selling insurance, medical schemes, collective investment schemes and pension funds.
In addition, motor vehicle dealers, furniture retailers, travel agents, car hire companies, freight forwarders and any other entity which sells insurance (or another financial product) as part of the service they render, are required to be authorised as financial services providers and to satisfy all the fit and proper requirements of the Act.
For advice on whether you or anyone in your organisation needs to be FSB registered and compliant, or to verify whether or not an intermediary or adviser is licensed, contact the FSB call centre on 0800 110 443 or 0800 202 087.
Use learnerships to comply with FAIS
Learnerships are work-based education and training programmes comprising structured theoretical learning and practical workplace experience.
They are an attractive means of training employees because of the grants available to employers who offer them. Employers in the financial services industry can access these grants from the Insurance Sector Education and Training Authority (Inseta).
Training targets which have been set in the industry are steep, however, there are many incentives to encourage corporates and small, medium and micro enterprises (SMMEs) to play a meaningful role in professionalising and changing the employment profile of the industry.
In terms of the Employment Equity and Skills Development Acts, companies with a total payroll or annual wage bill of R500 000 or more must contribute one percent of their total payroll as a skills development levy.
The levies are managed by various sectoral education and training authorities (Setas), and companies are able to claim grants from the Setas for training and development in line with guidelines agreed by the Department of Labour.
A key objective of the Skills Development Act is to develop new skills in our country's workforce and improve productivity in the workplace," says Nikki Wouterse, the chief executive officer of ICG Learning Solutions, a division of the International Colleges Group which is working with Intec School of Insurance to offer FAIS training.
Intec School of Insurance has made a significant investment in the development of registered learnership programmes in the financial services sector, and is an accredited training provider of the Inseta.
In association with ICG Learning Solutions, Intec School of Insurance offers employers full assistance with learnerships, from the provision of study material to workplace training, trainers, marking of assessments and ongoing reporting.
Wouterse says learnerships are the how to of the Skills Development Act and Financial Sector Charter targets in that they enable participants to achieve a qualification that is registered on the National Qualification Framework.
The Skills Development Act encourages employers to see the workplace as an active learning environment, and learnerships as a vehicle to develop a suitably trained and qualified workforce.
In addition to the requirements of the Skills Development Act, the Financial Sector Charter sets out a number of guidelines for companies. The overall focus is on the investment in human resource development, with special emphasis on increasing the participation of black people in
leadership roles.
Targets from the charter are formal guidelines rather than acts of law and are in addition to employment equity and skills development legislation and skills levies. These targets include:
- 20 to 25 percent of black people at senior management level by 2008;
- 1.5 percent expenditure of total basic payroll per year on the training of black employees; and
- 4.5 percent of total employment in the form of registered learnerships.
Apply for a learnership grant
Inseta anticipates that it will be ready to process applications for learnership grants between May 1 and June 30, making this the ideal time to select your learners and their training programmes.
Approval of learnerships will follow from July 1 to August 31, leaving September 1 to December 15 as the time to put the learnership agreements in place.
Inseta received an unprecedented number of applications for learnership grants for the current year. To meet the massive need, it has applied for a further R60.5 million from the National Skills Fund. This will substantially increase the funding resources for learnerships.
Companies have a wonderful opportunity to benefit from learnerships through tax benefits and grants, Wouterse says.
There are a number of excellent learnership programmes which have already been developed by Intec School of Insurance in conjunction with Inseta. These programmes not only lead to a full qualification and on-the-job training; they also ensure that employees undertaking the courses meet the requirements of the Financial Advisory and Intermediary Services (FAIS) Act.
- For more information on learnership courses and Intec School of Insurance's full learnership service, call 0860 10 40 14.
- For more information on how to apply for a learnership grant, call Inseta at 011 544 2000.
Big incentives for companies to train their staff
The incentives that are available to corporates who offer learnership programmes to their employees are substantial. In many cases, these incentives can match and even surpass the cost of the learnership programmes.
The incentives come in the form of grants, which are channelled through the sectoral educational and training authorities (Setas), as well as substantial tax benefits.
Seta grants
In terms of the Skills Development Act, Setas are tasked with disbursing grants to employers to cover the costs of running learnership programmes. Setas may differ in the way they fund their learnerships.
The cost of learnerships offered through the Intec School of Insurance is usually within the Inseta grant. To compensate for learners' allowances that must be paid to unemployed learners, the grants for unemployed learners are usually more than those paid for employed learners.
Employers should note that grants must be applied for and are only available once the learnership is registered with the Department of Labour. Funds are limited, so companies should be prudent in going ahead with learnerships before the funds have been approved by Inseta.
By September, Inseta will announce which 2006/2007 learnership grants have been approved.
Tax incentives
In addition to claiming learnership grants from Inseta, an employer can claim a tax incentive from the National Treasury when registering a learnership agreement.
For agreements entered into from March 1, 2006, the tax allowances will increase as follows:
An employer may claim a tax deduction of 70 percent of annual wages paid to an employed learner on an approved learnership programme - up to a maximum of R20 000. This amounts to a tax saving of R5 800 at the start of the learnership and an additional R8 700 on completion of the learnership. In most instances and depending on the number of learners on a learnership programme, this tax saving of R14 500 could cover most of the training expenses.
By entering into a learnership agreement with an unemployed person, employers may claim a tax deduction of 100 percent of the learnership allowance paid to the learner up to a maximum of R30 000. This amounts to a tax saving of R8 700 at the start of the learnership and an additional R8 700 on completion of the learnership. Again, in most instances and depending on the total number of learners on a learnership programme, this total tax saving of R17 400 could cover most of the training expenses.
As these tax benefits are over and above the grant from the Setas, it makes financial sense for corporates to invest in training new and existing employees.
Trevor Manuel announced in his 2006 Budget that the tax incentive scheme on learnerships will be extended by five years to run until October 2011. In addition, the allowance increases are at an estimated cost of R80 million to government.
Get 40% off your course fees
Advisers who study through the Intec School of Insurance towards the qualifications they require in terms of the Financial Advisory and Intermediary Services Act, qualify for a 40 percent discount on their fees.
The Insurance Sector Education and Training Authority (Inseta) has endorsed the Intec School of Insurance, and Intec is the only training provider able to offer the 40 percent Inseta subsidy.
All independent financial advisers and small to medium enterprises with fewer than 50 employees qualify for the subsidy.
To access the subsidy, you simply pay the Intec School of Insurance 60 percent of the course fees, and the learning institution will take care of all administration and liaise with Inseta, it says.
The subsidy translates into a cost saving of between R760 and R1 220 per individual, depending on what you decide to study.