The impact of the financial advisory and intermediary services act of 2002 on consumer awareness and financial service providers in South Africa
Loading...
Date
2011
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Zululand
Abstract
The financial services industry is characterized by product suppliers having more
information than consumers regarding product features and services. The purpose of this
study is to explore this information asymmetry with particular reference to the Insurance
Industry. Financial advisors, acting as intermediaries, are charged with the task of
resolving this asymmetry through mandatory disclosures demanded by regulation. In
South Africa, the Financial Services Board (FSB) monitors, regulates and supervises the
financial services industry through the Financial Advisory and Intermediary Services
(FAIS) Act of 2002 (RSA, 2002) and The Code of Conduct (RSA, 2003) for Financial
Advisors.
This study distinguishes financial products from other products and highlights the need
for disclosures regarding product features, fees charged and contractual limitations of
financial advisors. The dissertation starts with a review of literature on asymmetric
information, regulatory interventions and consumer literacy. The subsequent sections
deal with the methodology used, followed by results obtained and analysis.
Using multistage sampling a national survey was conducted to establish whether
consumers: are knowledgeable of the features of basic insurance products; are aware of
disclosures they are entitled to; and are aware of the consumer education initiatives of the
Financial Services Board. The empirical survey also captures consumers’ perceptions of
their financial advisor’s knowledge of financial products on the market. The extent of and
the reasons for premature termination of policies are also established.
A survey was conducted amongst a sample of compliance officers to capture their
perceptions regarding the disclosure of fees that are charged by financial advisors;
clients’ knowledge regarding the features of Life Insurance products; premature
termination of policies and some general practices amongst financial advisors. The
surveys were supplemented by an interview held with managers at the Financial Services
Board.
Description
Submited to the Faculty of Commerce, Administration and Law in fulfilment of the requirements for the degree Doctor of Commerce in the Department of Business Management at the University of Zululand, South Africa, 2011.
Keywords
Consumer behavior -- South Africa