#26 LeRoux Van Wyk – Transcript

Louis van der Merwe
Welcome to another episode of Financial Planners, South Africa. Today I have LeRoux Van Wyk with me in the studio. And we’ll be discussing all things compliance, this is not the topic that most people get excited about. So the rule, I’m really happy to have you year to talk and unpack what compliance is, and maybe change the way advisors see compliance in South Africa.

LeRoux Van Wyk
Hi, Louis, thank you very much for having me, it’s an honor, I’ve been enjoying your podcasts. And I’m glad to share whatever I can.

Louis van der Merwe
So for full disclosure, the roo is our compliance officer in our practice. So we’ve been experiencing, the way he deals with his clients and the way he delivered his compliance function. And this is not something that people often get passionate about, about saying, you know, this is really as a compliance officer, that you need to work about work worth and include in your business. But before we get to your role as compliance officer, I want to know how you got to start Etude. And you know, how you got into the financial planning industry. So give us the background of how the room got into financial services.

LeRoux Van Wyk
Yeah, we, it’s not that long a story, but I don’t think anybody finds himself willingly into the compliance environment, in necessarily. So my background is out of a software development environment, where I started working for the Stellenbosch University, in stay in South Africa, developing a online learning platform as part of a team for them. Progress from day to working for one or two other software development firms as well, we have design systems and, and basically, folks are focused on database design and process design concern. And it was about five years or so down the line that I was approached by a financial advisor, in Somerset West, we also stay and he came to me and said, Listen, we just got a need to manage his client base, he needs to have a better CRM system, a customer relationship management system, and you’d like to know whether I would join forces with him. And it was a very easy move to make. Getting out of the little bit of corporate environment of established university and going into the financial services industry, which at that time, I did not know anything about I worked for him for about five years, developing a CRM system. And in that time, I really discovered what the financial services industry was all about. I found my way, becoming a shareholder in that business of his and as the system developed, you know, I also quickly realized the the additional requirements that I imposed on a financial advisor, other than just, you know, software development and, and my scope of, of expertise. So yeah, I raised my hand as one of the shareholders to take on the job of internal compliance officer, not know, fully full well, what it what it entails. But I did realize that there was a, there wasn’t a need for it, and there was some some urgency to take to get some of the compliance requirements in place. So from there, I am a consultant with some external compliance practices, I applied to become an internal compliance officer, myself, I managed to get approval to this department, the FES Act came into, into being and then you know, we, we started developing processes and and that was about probably two years down the line that I realized, but you know, having one environment that you need to become get compliant with is quite easy, but there’s no real challenge in it. So I decided to sell out and open up independent compliance practice, and offer that service to whoever else is, is willing and able to, to have me. So yeah, from there. And that’s, that’s the start of Etude. I was very shortly after joined by my partner, currently teletag will appear who has a very, very broad legal background, but I won’t get into that in too many detail. But suffice it to say, from the year it grew to where we are at the moment,

Louis van der Merwe
I love the fact that you know, the legal background and will join forces with the information technology side, we often hear this question, you know, as a financial planning practice, do we build our own technology? Or do we buy something off the shelf, and this company brought you in to say, let’s develop our CRM, if we can maybe unpack that a little bit? How was the outcome of you, you know, spending five years building internal systems, did it work and what’s your view on building versus buying?

LeRoux Van Wyk
Your that was a very interesting conversation I had with with my partner at that time, because he was it was quite a bit older than I was at the time. And he had come from, you know, an agency environment, the old southern life. And he was very aware of, you know, the need to go digital. I mean, I remember spending weekends with him where we scanned files to put it all on electronic format. So for him, he quickly identified two is, you know, created the, the the need for a system, he consulted with me, we had a couple of conversations in terms of, you know, using off the shelf software systems that can be used to just maintain that relationship with clients. But it was me I was the one who pushed him to say, Listen, it’s develop something customized, because each business has a unique requirement. And that’s unfortunately, the problem that we have today. I’ve listened to some of your previous podcasts as well. And a lot of the guys especially I didn’t often miss intimated to the fact that this, there’s no simple single solution that will fit all of all the financial advisors and I absolutely agree with that. But I do think that there is there’s different strength in combining multiple systems to come to some form of of solution that fits your specific business.

Louis van der Merwe
So that kind of best of breed approach, pulling these pieces together. Because keeping developers in your business is also really difficult. You need to keep them excited. And you also need to give them paid, which can be really inexpensive resource.

LeRoux Van Wyk
Yeah, absolutely. I mean, software developers, as I was reading last night, one of the most highly paid positions in South Africa at the moment, because it’s a sort of the So absolutely, and I can tell you, most financial advisors, if they do see the need for a software system, they’re not going to pay that type of salary for a software developer in house that does not necessarily generate an immediate income for them. So absolutely, that is a need. But I do have to add as well, that, you know, in the last 1520 years, a lot has changed with regards to CRM systems update, accounting systems, human resource management systems, they can all be integrated nowadays. So it’s not a case of having just one system to fit all of your needs. The key is just doing that integration. And, and that’s where we need that type of expertise.

Louis van der Merwe
So the route you enter later started a tude, you have this background of looking at systems and seeing the way financial planning business runs. What surprised you in those early days of dealing with your clients?

LeRoux Van Wyk
I think the most interesting thing was a couple of my clients initially was referring to the compliance a compliance officer, you know, before I got appointed, and when I was appointed as their the incoming EBITA. You know, they honestly didn’t see any, any good come from a compliance officer. And as, as we engaged with them, both elite and myself, we were we were awestruck at how most financial advisors are just executing, you know, what the external sources tell them to do. They, if they get given a generic template, they simply turn around and apply it in their business, if there’s 100 documents that they need to implement, they will implement 100 documents, they don’t ask questions. And for us, the big thing was that, you know, you want to engage with them, you want to make them understand what it is that you’re doing. And they must tell you whether they need it or not within their business, once they understand that. So there was a big gap in it just, you know, sitting down with them and selling saying to them, less is more in this situation. You know, I’m not saying that they must be compliant and all aspects, but having more documentation doesn’t necessarily make them more compliant. It’s how you apply that, and how you customize it for your specific business. And then that’s, you know, you talk about Talita. And the legal aspect that she brings in from my background and my specific focus, I can often take away more, then no, you actually want me in terms of streamlining a process. So Talita has been instrumental in saying Hang on, this is academically, what we have to have in place, we cannot remove it, we can streamline it slightly, but this and that, and this and that is we can we can trim the edges. So between the two of us, we are really, I think we’re a good team. And we really enjoy working together. And we have this dynamic, like you said where the legal doesn’t get to have a burden. But the system side for me doesn’t run away and make things so streamlined that there’s no compliance involved.

Louis van der Merwe
You mentioned that income inhibitor. I’ve heard someone talk about a business prevention officer. But actually it’s about you know, building a better business someone from the outside looking in. Can we talk a little bit about you know what you see go wrong with internal compliance officers, because in South Africa for the international listeners, you can decide to keep your compliance officer in us, if legislation allows you, or you can appoint an external compliance officer. Yeah, I’d love to hear because in my mind, there’s risks to both. But I’d love to hear how you see that and what you might have experienced? Yeah, that’s

LeRoux Van Wyk
a very, very good question. Well, I love answering that, because I would fully support any financial adviser who wants to appoint an internal compliance officer, I say that at my own detriment, because I can’t act as an internal compliance officer. But, you know, the only reason why most of them don’t do that is simply because of the cost. If you have the capacity, and they have the means to do that, absolutely find yourself an internal compliance officer and do that. But then, in addition to that, have an external consultant or external compliance officer, that can that you can consult with all that internal compliance can consult with, the reason I say that is that internal compliance has the ability to look at every aspect within your business very closely, you know, processes every step of the process, and not just do a random sample once a month or once a quarter, or even once a year, you know, took from an external perspective. So having that internal audit, as part of your internal compliance function is very, very valuable. What external compliance officer brings to the party, if I can call it that is that you have an expert expert, who has scope of a variety of other clients, and identifies problems that’s common in the industry and can share solution with your internal compliance officer. So that combination is is is very good and very handy to have. But in most cases, you know, having an internal compliance officer for a medium to small sized business is just not feasible. So you would want your external compliance officer to have multiple compliance officers that he or she can talk to, and not just one individual. Within at this role, we often rotate the compliance officer appointed to do an FSB, just so that, you know, we don’t, we can highlight our own mistakes effectively. And, you know, a compliance officer such as Talita, or one of our other compliance officers can come in and have a slightly different view in terms of the interpretation of that specific company. Whereas I might have the same, but my explanation to the client is slightly different. So there’s definitely scope there to have multiple compliance officers. But yeah, generic response to your question is, I would definitely go with both.

Louis van der Merwe
Yeah, this fresh set of eyes just trying to see something that we might have been looking or missing. All along, I would almost add, you know, the agency risk to having an internal compliance officer because you’re paying that person salary, do you find that it’s difficult for them to highlight problems, when the employer is also the one paying their salary,

LeRoux Van Wyk
you’re, in my capacity as an internal compliance officer, I was fortunate that I had direct access to senior management. And that is crucial. Having that governance structure in place where the compliance officer can report anything irrelevant, irrespective of the of the nature or the severity of it to senior management or top management. So you would hope that if the internal compliance officer is appointed, that a structure like that is put in place, but absolutely, it does happen. You know, even as an external compliance officer, we don’t receive our fee from the regulator, we receive it from the actual client. So you can imagine, you know, if, if I annoy a client by reporting, you know, us threatening to end my contract with him. And that would be my income that’s at stake at the same time. But yeah, unfortunately, in our scenario, the income per individual per individual FSB is relatively small. So that’s not a threat. And that since plus, we do have a good relationship, which, you know, allows us to engage with our clients and advise them if anything of anything, before it escalated or irregularity report is submitted.

Louis van der Merwe
Now, we’d imagine you wouldn’t want a reputation of a compliance officer reporting all the clients but rather working with him to try and prevent, you know, these issues pop up in the future.

LeRoux Van Wyk
Yeah, it again, it’s difficult because the regulator doesn’t appoint us to be their consultant or the face to the client. We don’t have any right to decide whether the thing something should be reported or not. If anything is non compliant, it must be reported, whether it’s in a simple transgression or a major noncom clients we can’t determine. So we have to report those. But we can act in best interest of the of the client is to notify them prior to non compliance coming into the picture, saying to them, listen, yeah, based on our risk analysis, we can see that your business growing into this area, this is something we should be concerned over, let’s focus on that it’s put pressure put processes in place, so that the pressure is off, in reaching that, that non compliance issue, which we will then be forced to report,

Louis van der Merwe
the rule, this role of being a key individual, is there a lot of Miss interpretation around what it actually takes, because when you’re starting a financial services practice, you know, you need to have a key individual in your business. But Do people really understand what it is and what it entails, before they start a business,

LeRoux Van Wyk
your individual is a problem in that you put a title on it, and effectively is the director or the manager of the company, you know, not in the appointment as such, but in responsibility. They a lot of training is being done in within that space to make the individuals aware of the operational and managerial oversight within the compliance space of an FSB. But, you know, you will have heard me talk about our past discussions between us that, you know, our concept of holistic Risk Manager, regulatory risk management really, which incorporates governance and compliance is where we see the importance. And if you look at that, then, you know, having a individual over only overseeing management of compliance, you know, is wrong, and they individually understand that there’s a much bigger picture. And they can have the title of the individual, but they have the responsibility of a director in terms of managing a business, and have a compliance officer in terms of making sure that the requirements are being met.

Louis van der Merwe
So this concept of off systems and you know, having a business run like a system, and your individual being there responsible to look at the systems in the in the business actually recurs, and it makes so much sense why someone with a systems background would would end up in compliance. Yeah,

LeRoux Van Wyk
it’s sometimes difficult because, you know, not everything fits into a box. A process doesn’t, it doesn’t make provision for every possible variation on you within a business. So as much as possible, I tried to put it into a process and make it understandable and make it repeatable. But yeah, there are there are some nuances and definitely where TeleTech comes in, she often eyelets those and then we build up the processes to incorporate those. And it’s difficult to explain that to a key individual or a manager of a business or a director or shareholder, just because their primary focus is to grow the business and they just want to go out see clients and and build that relationship. You know, it’s a difficult thing of a mechanic not working in his own car, you know, they can build the business growing, seeing clients bringing income, but then neglecting the basics of good structure, governance and dedication of compliance frameworks and, and requirements that could effectively closed their business, you know, at the peak of the income.

Louis van der Merwe
Explain to us the difference between compliance and governance, how would you describe that,

LeRoux Van Wyk
for me, it’s relatively clear. Again, from a process perspective, governance for me is the structuring of your business and, and the management of that structure and how each of the various departments, individuals, external contractors, parties, all of them, how they coexist within an organization and how that relationships and everything is managed. Whereas compliance is the set of rules set by was not the set of rules itself, but the you know, the way in which an organization adheres to that set of rules, which is set up by the regulator, through legislation. So it’s very, very much different in terms of governance, because you don’t dictate the structure of compliance, it is just something that needs to be executed based on a set of rules. Where it becomes tricky is you have to identify those rules and which ones are applicable to your organization and then apply those good governance you know, always will require that there is structure in place and article management of staff, and, and management of assets within an organization. So the two have obviously different in my opinion, but they do fall part of one bigger exercise in terms of the better management of a company. Lu, are

Louis van der Merwe
you saying that companies are missing the governance piece? The governance piece? They focusing too much on the compliance and neglecting the governance?

LeRoux Van Wyk
Absolutely, absolutely. In most of our engagements, we identify a basic non compliance or not even an existence of any form of structure, formal structure or documentation surrounding those basic governance aspects. I mean, it’s it’s often spoken about succession planning, for instance. Yes, it is, it is a compliance requirement to have, but it’s just good corporate governance to have a succession plan in place. And if you’re a smaller businesses, especially a sole proprietor, and also, you know, an operational ability plan, I’m not referring to, you know, a legal document that’s 50 or 100 pages. I’m just talking about, you know, what, what’s going to happen? Or what can happen in the event of a disaster? How can the business operate? How can they continue operating, you know, when their disaster strikes. So there’s a couple of things there that, that it does get referenced in various pieces of legislation, and is considered to be a compliance requirement. But if you take compliance out of the equation, it would be very good for any business to have that in place. And that’s exactly what governance means.

Louis van der Merwe
So just really good business practices to be able to build a profitable, sustainable business. Absolutely. The rule with a shift to kind of outcomes based legislation, we’ve seen these major changes, you know, everyone’s talking, or not really talking about Twin Peaks, and TCF anymore. Those are terms that didn’t hear everyday, maybe in the compliance world. It is, but how does the governance fit in with outcomes based solutions?

LeRoux Van Wyk
Louis, that’s a, it’s an interesting discussion, I think, I remember us having to write right at the beginning as well, it said, for us, we would like to very much see a change within our own client base. Some of them have adopted that a lot of them have not where your outcomes based approach is seen in the business. In other words, where they don’t rely on a set of documents, that tells them what they must do, they have the actual structure in place. And the structure itself is an explanation or a declaration of their, of, you know, of the things. And we tried to introduce that with our clients by just talking them through the process. I mean, again, I’m going to use the example of a succession plan. A lot of them don’t have that in place. But if you sit down and you talk them through it, you realize they have put all of those measures in place, they have all of the relationships, I’ve considered that they’ve even valued their business, but they haven’t gotten down to, you know, putting it into writing and formalizing it. So we would like to see that but, you know, grow we companies or considering all of those aspects, talking them through and putting it in place, and then afterwards saying, Okay, we have these employers, let’s just formalize it by putting a document in place, as opposed to asking a compliance officer, for an example of a succession plan, you know, printing that or putting it onto file, you know, changing maybe a name here and there, and then signing off on that. That’s where we would like to see the big difference coming in.

Louis van der Merwe
That’s so similar to dealing with a new client in the financial planning world where oftentimes they feel that they have nothing in place. And as you start talking through it, you realize, actually, there’s probably more than what they think. And what I’m hearing, is you saying, actually, you know, the businesses have more employees that is maybe just not well documented. And what comes to mind is, what is the regulator want to see, when they come and do an audit took us through, you know, maybe your experience with an audit, because that often is something that key individuals might lie awake at night worrying about a phase audit, or a fake audit. I want to hear some of the interesting stories you’ve experienced, and maybe we can unpack it a little bit.

LeRoux Van Wyk
Absolutely. The most recent incident was was a quick inspection we had up in Johannesburg. And it was fascinating. We have a very good relationship with with most of the regulators we deal with, where there’s, you know, analysts involved that we can actually engage within not just In a helpdesk, so in that specific onsite, you know, the client had done quite a significant amount of preparation, you know, which we obviously assisted them to do, we were very specific in saying that we’re not going to write the documents, we are we will help them worded correctly, so that they actually say, what happens within their organization as opposed to something we tap for them, you know, give it to them, they sign it, often, it doesn’t reflect their business such. And so doing the on site, within the first half an hour, the analyst turned around, and I was in the meeting as well. And he looked me straight in the eye said, you’ve got a good writing style. And I said to what you mean, I, I can clearly see you wrote these documents, or client did not. And I initially, I was a bit worried, because obviously, you don’t want the regulator to see you helping your client to the point where you’re leading them on. But, you know, after having that discussion, you know, he clearly said to us that he doesn’t have a problem in seeing, you know, touch up effect work, if I can call it that from an external compliance officer, because that’s, that’s why we they we help the client is streamline and, and just direct the efforts. In the first thing he did after that statement was turned around to the client, and asked him, you know, what is the process that’s documented in there, show us through that specific case, it was the KYC process, take us through the process. And he was very quickly able to see that the client understood that process, they have access to all the various systems and those systems matched in the actual or MCP, that he was reading through. So it’s, it is intimidating, because, you know, you have to show the regulator stuff, you wouldn’t necessarily show anybody else. And it’s not stuff that you that you might be dealing with on a daily basis. If they do ask for something like a succession plan. You don’t have that document open on your desk every day. So you can open it, and he’s gonna say, Well, I see a name here of a person who, you know, have an engagement with, you know, is this person available in this meeting? And you kind of have to sit back, I’m having spoken to this individual by 12 months done. Let me let me go back and explain the scenario to the regulator. So that’s, that is intimidating. And it does, you know, make us a bit even, even one of us makes it a bit nervous. But, yeah, the point is that every regulator, every on site, we’ve had so far, has been very consultative, the regulators have said, Listen, this is what we see. Explain to us in your own words, you know, how it is that you do, what you’re saying over there, and they do go and then match the two to see whether the plan or the policy or the procedure is applied within your business. And, you know, if we do have that opportunity to go with the glide through those various processes, it’s never the case where there’s a there’s a mismatch, we would rather and this is why I’m going to go back to what I said in the beginning is that we would rather take out processes that aren’t used, and instead of having them there, and then the clients asked, how does that process work? And then they say, Well, we’ve never had to do that, because the regulator will then ask you Well, why do you have it yet? Now? What’s the purpose of it? So yeah, it’s, it’s not something that I look forward to every time. But at the end of every one of those meetings, I can tell you, we have a good laugh, and it’s always always very constructive.

Louis van der Merwe
So the intention is not to close your doors and stop you from doing business. It’s to prevent these disastrous outcomes. Is that right?

LeRoux Van Wyk
Absolutely. I mean, remember, the regulator doesn’t want to see the public without financial advisors. They want to see the public being advised and they also actively promoting the public engaging with authorized financial advisors. So, if they can prevent from closing your business, because of non compliance, I certainly will do as much as I can do to prevent that. But at the same time, you know, if they do find in a non compliance, that that does not meet with the the minimum requirements, and they will certainly engage in and take the steps to go further. But again, our experience has been very much that the engagement with the regulator is very open. The analysts are always willing to provide guidance in terms of how it can be mitigated. You know, their whole approach is issuing a mitigation plan with remedial steps. They give a timeline, and it’s a well structured process. It’s not, you know, coming into an office, you know, in closing the doors as they leave and you know, lock on it, at least not with this on site we’ve experienced in the past.

Louis van der Merwe
That’s wonderful to hear. Thank you for unpacking that for us. I want to talk a little bit about the unregulated side, we have a lot of people that are quite vocal saying, you know, if your advice is not leading to a product, maybe you don’t even have to have an FSP. And then you are the other hand where there’s financial products, you know, there’s the crypto side that’s not regulated yet, how do those two meet and ways regulation going without confusing us too much,

LeRoux Van Wyk
it is always difficult. We prefer to engage with with a client on each specific scenario, because there’s a lot of variation in each approach. And the facts, you know, need to be considered before, you know, one can even start to respond to that. But I think a common misconception, again, amongst our client base, is that, you know, they’re not offering it that the client is not necessarily going to end up in that financial product. So it doesn’t fall within that scope. But unfortunately, that is not true that the advisory component that they execute, is exactly where the regulation applies, they they’re going to consider what it is that they’re saying to the client, how they’re saying it how the client will be impacted, the client might not decide to go in with that advice from your from from, you know, as you kind of say that to him, but they might walk over to an agent or another financial advisor, bringing some of that advice across and then introducing that into into their portfolio at a later stage. So it is it is often you know, misunderstood the difference between advice and intermediary services, another common discussion, you know, where you are leading the client into investing or taking out of specific policy, you know, that’s considered intermediary services. But the difference is quite as quite big, it’s just very important that you know, as financial advisors, you have to understand that by virtue of your appointment, as authorized financial advisor, you have, if I can use the word, you have a limelight on you to whatever you are saying is being listened to. So you have to consider everything that you share with your audience. And very much stay away from any financial product that you know, is not being regulated at the moment. And again, whether it’s because of the client, insisting that episode may be discussed or another advisor introducing, it doesn’t make it suddenly allowable. You just want to steer away from any discussion in that space, and focus on the products that you have experienced in what you have your training with. And again, what you have been authorized for

Louis van der Merwe
the rude reminds me of those cartoons, where in the background, you can see the advisor, and there’s a poster that says asked me about hedge funds. And that’s Todd’s conversation about hedge funds. And what you’re saying is that, you know, if there’s an open door, don’t just walk through it, but consider the impact of the things that you are saying, you know, maybe in the office or even over the weekend, when you’re engaging with with friends, maybe in a social setup.

LeRoux Van Wyk
Yes. And that’s if I can, you know, maybe elaborate on why I’m enjoying your podcast is because you’re interested in the for the overall approach of offering holistic financial planning to a client appeals to me very much, because if you engage with an individual, on on his his entire portfolio holistically, and you consult with them at a fee, as an example, if the client is prepared with questions, you’ve done your homework, this is very much of an engagement, where information is exchanged and received by by yourself or by the client. Whereas isn’t, isn’t just a direct agent, you know, your information is blurted out, you know, around the campfire, or it’s, you know, sitting in a restaurant context, and somebody picks that up and decides to do to engage further based on that, but they don’t actually understand the full picture. That’s why, in my opinion, you won’t, you won’t find a doctor sitting around the campfire, giving medical advice, they want to one on one, engage with the individual understand the problem and, you know, kind of look them in the eye when they when they give them the advice knowing that that’s specific to that person and they’ve, you know, they’ve taken into account, you know, holistically what could could be wrong.

Louis van der Merwe
You mentioned this idea of the doctor saying, you know, Come in to see me so that we can determine what’s wrong. And patients and clients are used to approaching a doctor that way. I’m wondering, what do you see as a compliance officer is the biggest value add that a financial planner can do? And also, how does that maybe differ? Or is it the same as what the man in the street might see a financial planner,

LeRoux Van Wyk
I’m going to go back to the previous conversation, and I’m going to say that, you know, the concept of holistic financial planning, I, I think for if I’m the man in the street, I go to see a general practitioner, Doctor, I don’t run to a specialist and show them you know, my knee, because, you know, my back is so out of my own free will, thinking that, you know, the knees a problem, I go to a general practitioner, they look at every component, and then they determine it is a knee or it might be might even be the hip, you know if I can use that analogy, but the same applies to a financial advisor, a financial advisor needs to take everything into account. And, and that also leads into the discussion of the tax implications to a client, I think, you know, a financial advisor should have access to a tech specialist, if they themselves don’t have the skill, because that’s a very big component of that holistic plan, to then determine, you know, where the need is, and for me, that’s, that’s where financial advisors currently are making a big difference in that they’re not just advising on one single product, they are looking at a variety of products, whether they offer those products themselves is almost irrelevant, but it’s identifying those products, and then pointing the client in the direction which, you know, based on the need would be highest, and so forth.

Louis van der Merwe
So this concept of a financial house check saying, Mr. Client, Mrs. Client, are you okay? And break Davidson loves talking about that thing, your biggest role is showing the client that they’re okay. And if they’re not, okay, helping them figure out how to get there, just like a GP might say, we found this thing on your skin, don’t worry, we’re going to work together to to sort this out. Absolutely. Is is that mindset being implemented in, in the client base that you look after, and maybe your interactions with financial planners, I’d like to say

LeRoux Van Wyk
so yes, but unfortunately, it is traditionally not the case. You know, most of our financial advisors have also come from agencies, where they were told to go and sell a specific product and not, you know, be interested in any of the other other components that forms part of the client’s you know, holistic financial plan. But it we, we often engage with our clients to promote the the concept of consultations with with individuals and is appealing because you know, there’s no regulation, limiting the amount that you can charge for your consultation with the client. So there’s potential huge income there for financial advisor. And most financial advisors aren’t just registered for a single product category or product that they are registered for a variety, they might have a little bit more experience in terms of whether it be the investment space, or the life insurance space, but they all are authorized for the wrist. So do we encourage that consultation, and during that consultation, the candidate will then have an hour or two hours available to talk in and tell them their story, as opposed to the financial advisor, you know, not wanting to spend too much time with the client, because all they want is they want the signature and that policy or investment must be placed so that they can move on. And again, the context might differ. There’s definitely a need for for that approach as well, where a client comes and says, you know, I only need this to be addressed. I have somebody else looking after the wrist, please just assist me with this. Again, there’s no there’s there’s no harm in doing it that way. But it unfortunately, doesn’t often happen, where the other advisor then looks at it holistically that other advisors potentially only just looking at the medical aid, or the short term.

Louis van der Merwe
That’s very valuable. Thank you, Larry. What we seeing in the US in some of the states is that the regulators asking advisors to provide evidence of their advice that they’re delivering. And they’re also questioning that the amount that they’re asking, but what you’re saying in South Africa is that there is no upper limit at the moment in terms of what you can ask for your advice. Do you think that might change in the future? And is the regulator looking at that space?

LeRoux Van Wyk
I’m not gonna be able to ensemble off of the regulator. I don’t know enough of in terms of that discussion today. To be able to give any insight in the in the space, but I do think that, you know, South Africa is, as we all know, behind in terms of regulation with the rest of the world and our implementation of it. And having our dealings with the UK regulator, the FCA, they very much open to embracing the outcomes based and that the conduct of the financial advisor, as opposed to trying to focus on rules based, which in itself encourages the client to go after their advisor to go out and see the client, consult with them, and not put a prohibition on the amount of time you can spend with them, or the cost. So I definitely think that in this African context, that is healthy, and I would hope that it’s going to stay open and not limited, within the next couple of years,

Louis van der Merwe
almost less regulation is more in terms of a free system,

LeRoux Van Wyk
yeah, it’s easier to to to make sure that the adviser is authorized for whatever is needed. And that, you know, we see that with all of the fit and proper requirements coming out to CPD job qualifications, class of business product training, all of that adds to a more qualified financial adviser. And then, you know, if you have the assurance that the advisor meets a certain corporate quarter requirements, you know, whatever they may, might be, and even if you bolster them up, it would be able to assist, you know, the ability of the financial advisor to have a meaningful discussion with the client, and then you don’t have to go and regulate that discussion. You know, just regulate the actual advisor,

Louis van der Merwe
are we getting to a point where regulation is causing advice to be too expensive? And are we excluding a segment of the market purely because it becomes so onerous to run a financial planning business?

LeRoux Van Wyk
Louis, I think, going back to my initial few years of entering in the financial advisors space, I was I was astounded to see the the low cost of running FFS financial practice, in my only reference was a software development space, you know, and their expense ratio is far, far, far higher, yet they have, you know, very, a lot fewer infrastructure to maintain. So, it’s a combination of factors. But I just, it felt, for me, it was a bit of a eye opener to see how the financial advisors consider expenses within their business. And I say that with respect for the advices, out there listening, because I think, you know, consider yourself, compare yourself to other businesses out there, and they make a determination from the on whether it’s at the expense. And then talking about compliance specifically, again, it’s a passion of mine. So forgive me for being for saying this. But, you know, compliance should form part of your of your of your day to day processes. It’s not something you do, you know, at the end of the month, or at the end of the week, or even worse, upload, employ somebody internally to go through and check the checklists, you know, that is required by a compliance officer. If it’s done as part of the business, it’s no additional cost. Absolutely. I understand, you know, paying an external compliance officer, there is a definite financial costs involved, having an audited financial statements, there is a cost involved, skipping capital aside, you know, because require legislation requires that those are all expenses. The problem is, would you do without them? If if there was no legislation? Would it? Would it be, you know, would it not be sensible to have them in place anyway? And then, you know, making them part of your day to day processes, you know, instead of seeing it as a burden, financially, so absolutely, I definitely think that there’s scope there and there’s an improvement, it is unfortunate, just a mindset that we have to change, you don’t start a business and run it from your car anymore. You know, we have entered the age where, you know, we we are giving professional advice to the man in the street and they are looking to us, you know, to be professional at the same time.

Louis van der Merwe
It’s wonderful to see that we are moving into that professionalization, and then people are fighting for professionalization. And I’m almost thinking that you know, just like we don’t have an ethics officer with someone to come and check that your ethical, you probably shouldn’t approach it from a tick box system saying okay, let’s make sure that we we are compliant and hence this whole shift to the outcome space thing. If your values and your business is running, you know, within your framework, you should automatically comply. Absolutely.

LeRoux Van Wyk
And, you know, again, if if you streamline the compliance requirements, if you cut out the unnecessary policies or plans that that have no relation to your business or no application, you’ll find that what remains is is the inner workings of your business. Don’t see it as a document that is constructed after having given the advice to the client as an example, it forms part of the process as it back, for instance, is a brilliant example of how that entire process is his advice record, you know, the same with with just, you know, keeping good governance within your organization, having employment contracts in place, it’s not, it shouldn’t be an exercise that you do at the end of the deceive, you know, whether your staff have got employment contracts, you know, when you interview them, when you make the offer, he put an employment contract in place. And and that’s part of the process in

Louis van der Merwe
lieu, what is next for Etude? What’s happening in the compliance world, and we are you making a difference?

LeRoux Van Wyk
We often laugh between the two of us, I don’t know, I’m very excited for the compliance world. I don’t know if I share everybody’s sentiments. But I think you know, we, we’ve got a great things planned at the moment we, we were looking to integrate the conduct of business within an FSP in our operations in the way we monitor and sample our clients. We want to move as far away as possible from from having checklists, and having more meaningful discussions with our clients where they can explain to us through a platform of sorts, how it is that they do specific things within their organization. So in other words, you know, we want to be at a point where, when we monitor clients, they tell us how they run the business, we can critique them on that, but you know, by them conveying that information through to us that in itself is confirmation of the process and within a system to just formalize that. So one of the ways we doing that is by integrating what we call a risk register, it’s effectively just a risk management plan, which most advisors would be very familiar with, you know, containing relevant questions that potential their business and how they comply to specific legislation. But then writing those based on the likelihood and consequence, coming up with a risk factor. And then having the discussions with the client or the FSB, based on those items or questions that are high risk, first, and then going down, and you know, addressing as, as you as you go through them through the calendar year. Whereas in the past, you know, you’ve you’ve got sit deliverables, you’ve got statutory returns that need to be submitted, and those would trigger certain things. But, you know, have waiting until the financial year end to review your management accounts. You know, it’s not sad business practice, you know, that should be done at the beginning of every month, and budgeting and etc. So having a fully integrated, risk based and outcomes based system, where we monitor clients and sample them, is what you can expect from us in the in the next couple of months.

Louis van der Merwe
Brilliant. Thank you for moving the financial planning industry forward and helping the clients move into an era where they can focus on their business and running a better business more sustainable, because ultimately, it means that they can serve more customers more clients in a better way. If people want to reach out to you and get hold of you what’s the best way to do that?

LeRoux Van Wyk
The best way would be via our website, just 822 dot zero dot today, all of our information is on there. We also quite happy to give out our direct telephone numbers. But everything is on our website. If they do want to reach out to us.

Louis van der Merwe
Brilliant. We’ll add a link in the show notes. And I want to thank you so much for being on the show today.

LeRoux Van Wyk
Thank you, Louis. It’s been an absolute pleasure.