Leveraging the CoFI Bill for strategic advantage: A guide for financial advisers

The Conduct of Financial Institutions (CoFI) Bill is poised to overhaul the regulatory environment for financial advisers by merging multiple conduct laws into a comprehensive legislative framework. If you are part of a financial services network that emphasises effective practice management, it is essential to understand how CoFI will impact you and assess whether you are at risk once the Bill is enacted. It should be noted, that CoFI may still undergo various changes and each financial advisory firm will have to make sure they access the impact on their business.

What is CoFI?

CoFI’s primary objective is to enhance customer outcomes by regulating the conduct of financial advisers. It encompasses a broad spectrum of criteria, including:

• Product and service development and implementation
• Operational expertise
• Capital requirements
• Business culture

These measures align with the Treating Customers Fairly (TCF) principles, mainly providing suitable advice to clients. Under CoFI, there will be a standard for advisers, product suppliers, linked investment service providers, discretionary fund managers, and other financial services providers.

Customer protection and trust

CoFI aims to safeguard customers by promoting financial inclusion and ensuring fair treatment. Fostering trust and confidence in financial products and services encourages transformation within the financial sector. This means establishing robust systems, processes, and sufficient operational capital for financial services networks to meet these standards. Ensuring partnerships with compliant entities throughout the client advice process is critical.

Industry impact

The CoFI Bill will unify and strengthen market conduct laws across the financial services industry, replacing many existing regulations. Its impact will be felt by all financial institutions, including financial services providers (FSPs), banks, insurers, credit providers, and discretionary fund managers (DFMs). Many advisers face the challenge of over-regulation. Joining a financial services network can mitigate this complexity by offering layered compliance support systems.

What CoFI means for financial advisers and the benefits of an IFA network

Adapting to the CoFI Bill may present challenges, but it also opens up significant avenues for growth, particularly when backed by a robust financial services network. As a member of the financial advisory community operating under an FSP license, CoFI will profoundly influence your practice in three key areas:

1. Streamlined operational processes

CoFI will intensify the focus on compliance with conduct standards and fair customer outcomes. Solid systems and robust processes are essential. Networks with access to such systems can help ensure your practice effortlessly meets the new compliance standards. Larger firms with comprehensive customer relationship management (CRM) systems may find this more manageable, while smaller practices might struggle due to limited resources.

At Graviton, with the support of the Compliance team and industry expert Anton Swanepoel, we haves re-examined all client engagement and advice documents to future-proof them for CoFI. We have engaged with all our advisers to co-create documents that they find practical and meet the principles of CoFI. The end goal is documents that are easy to use, compliant, and enhance the client journey.

2. Financial stability and capital management

CoFI mandates that adviser practices maintain sufficient capital to cover potential risks, a stricter requirement than current legislation. Being part of an IFA network can provide greater financial stability and support, helping your practice meet CoFI’s requirements. All businesses will be affected except those already well-capitalized or with wealthy shareholders.

Moving beyond compliance

CoFI’s overarching goal is to ensure the best possible outcomes for clients by requiring advisers and financial service providers to have effective processes and controls. It emphasises that the client’s best interest is paramount. Practices and IFAs must comprehend the real-world implications of CoFI and how it will affect their daily operations.

Preparing for CoFI with Graviton

Increased regulatory pressures have driven some advisers out of the industry, but for those who adapt with the proper support, CoFI offers tremendous opportunities. Partnering with an IFA network like Graviton, which supports your independence while providing discipline, rigour, and resources, can help you navigate these changes confidently.

As the implementation of the CoFI Bill approaches, it is crucial to consider your next steps to ensure your practice is prepared for the impending changes.

Additional insights

• Collaborative networks: The value of being part of a well-structured network cannot be overstated. Networks like Graviton provide comprehensive support, ensuring advisers can concentrate on their core competencies while adhering to new regulations, fostering a sense of support and community.
• Technological adaptation: Embracing technological advancements in compliance systems can streamline operations and reduce the administrative burden.
• Ongoing education: Continuous professional development and staying abreast of regulatory changes will be crucial in navigating the evolving landscape, underlining the importance of staying informed and prepared.

By addressing these areas proactively, financial advisers can turn the CoFI Bill from a regulatory challenge into a strategic advantage, ensuring their practices comply and thrive in the new regulatory environment​​.