Stakeholders in the financial sector need to up their game to ensure that the average South African has a better understanding of how financial markets work, says Finance Minister Nhlanhla Nene.

“As government, we need to ensure that a proper legislative and regulatory framework is in place. All relevant stakeholders need to up their game to ensure that the average South African has a better understanding of how financial markets work and that this terrain is not only reserved for the privileged few that have the financial means to get expert advice on how to beat the market.

“To be more direct, we need a financial market that is more ‘inclusive’ and products that are simple enough to ensure more people are able to use them,” said the Minister.

Nene was addressing the 10th anniversary dinner of Argon Asset Management in Sandton on Friday.

The Minister said the country needs an ethical industry that does not prey on the ignorance of people and in instances where this does occur, punitive measures must be instituted to send out a signal.

“As a collective, we cannot tolerate such behaviour and as an industry, you need to reflect on ways to enhance the participation of black fund managers,” said the Minister.

Twin Peaks framework

The Minister said the National Treasury’s new regulatory framework will now place as much emphasis on ensuring that financial institutions treat their customers fairly as on making sure that those institutions are solvent and liquid.

“What is more, we are shifting from a rules-based regulatory framework that has supported ‘tick-box’ compliance, to one which prioritises good outcomes for financial customers and the macro-economy.”

Financial institutions will need to show that they are not only meeting the minimum rules set, but that they also have an entrenched customer-centric approach to their businesses across the product life-cycle.

This means that upfront a product should be designed with the customer in mind, the product should be sold in a manner which is fair and transparent, and the customer should be able to hold the financial institution accountable should the product fall short on what was committed.

The Minister said pension and retirement funds, which are closely linked to the asset management industry, are an area that requires special attention and that there are a number of short to long term reforms that National Treasury has embarked on.

South Africans, said the Minister, do not save sufficiently for retirement and for any unforeseen contingencies. Some of those that do save do not save their retirement funds for the long haul to retirement by taking it out when they change jobs.

Additionally, the country needs to address the issue of the retirement of vulnerable workers.

“There are an estimated six million low income workers in agriculture, construction, retail and ‘domestic’ sectors who do not have employer based retirement arrangements.

“National Treasury will be working with labour unions, employer organisations and industry towards establishing good value, convenient and standardised retirement funds for these workers,” Nene said.