The financial world: constantly in motion!
By Jo Viaene - Director Optima Group
Optima was established in Belgium in 1991 as a pioneer in financial planning. The concept, which originated in America, was adapted to the Belgian social and tax system. At the time, of course, this was fairly revolutionary. Nothing was known of Financial Planning in terms of the method adopted or the way it was implemented in the various subsectors. Year after year, the concept was further refined and broadened.
I. A great deal has changed in the sector since then. The market has matured and a variety of players now undertake financial planning from their own specific point of view.
A few examples:
- Bankers and private bankers who map out and optimise the client’s personal financial situation from their own perspective (succession, for instance).
- Insurers and insurance intermediaries who prepare a plan that focuses on building up a pension over the long term
- Dozens of brokers and agents who work the market with various forms of financial planning. They often use specific software tools for this, developed by specialised parties over the years.
How is Optima dealing with these changes in the market?
Optima has always opted to flesh out the concept gradually. Clients not only receive a good strengths/weaknesses analysis in terms of income, assets, pension and succession, but also practical proposals designed to improve their position. This involves both technical optimisation and the fine-tuning of asset or pension products. Today, Optima is in a position to offer all possible solutions from a 360° perspective, as regards both banking and insurance. Optima is now a recognised financial institution and a recognised credit and insurance broker.
II. Not only is the market changing, but the regulator is not remaining idle, either. A new law relating to financial planners and businesses engaged in financial planning was adopted on 25 April 2014, taking effect on 1 November. As from that date, the practical implementation concept and the organisation of those persons or institutions wishing to serve the market have thus become more stringently supervised. In addition, the supervisory body will carry out random checks to verify whether all players abide strictly by the new regulations. There is no doubt that this is bringing about far-reaching changes on the market. Some parties are already pulling out(for instance by returning to insurance brokerage), while others are merging or joining bigger players. For the first time, the regulator is defining what constitutes an independent financial planner and how they should behave.
The market will therefore fall into two segments: on the one hand, the fully independent planners who will have to confine themselves to drawing up financial plans (and may not under any circumstances give product advice) and on the other hand the planners who work within the framework of a recognised, regulated profession (bank, insurer or insurance intermediary, for instance), and develop financial plans on this basis.
What is Optima’s position in this new, regulated environment?
Optima has, of course, followed the development of the new regulations closely. Right from the outset, we set out our vision for the supervisory body and took part in various consultation sessions. Optima does not need to make any changes to its actual approach, but we cannot present ourselves as an independent planner since we operate as a regulated institution. This does not need to be a disadvantage. After all, our potential clients benefit from knowing that we always adopt a solution-focused approach to financial planning. That is what clients want: not just advice, but a plan and concrete proposals to actually put the theory into practice.
The improved regulations offer opportunities for those parties that are professionally organised. Financial planning has now been defined for the first time and all market players wishing to engage in financial planning are under the direct supervision and control of the FSMA.
III. Another issue is that of consumer protection. The financial crisis experienced since 2008 and the heavy losses suffered by many investors have led to a jumble of new rules intended to map out the risks more clearly. Every consumer is given a profile in line with their situation, age, financial knowledge, assets and risk appetite. Once profiled, investors are only offered access to those products that fit their profile. It may not be that simple in practice, but it has the advantage that consumer awareness of risks has improved.
What steps has Optima taken to deal with these new rules?
Optima has long worked on the basis of a full audit of the client’s financial situation. This unique piece of work provides a comprehensive insight into the client’s assets. Every client completes a detailed checklist that gauges their wishes and objectives in the long term. At the same time, a MiFID profile is defined through targeted questioning and this has to be observed throughout the entire process. No product advice can be given without prior profiling.
Internally, we have further developed the entire administrative support for the field workers. Clearly, the increased regulations mean that the back-office structure is growing in order to prepare, organise and where necessary update the right documents. The identification and risk profile exercise is an ongoing process and a real test for everyone involved.
Today’s financial world is clearly changing all the time. The increased competition on the market, the new position of the supervisory body and the more stringent consumer protection provisions compel existing players to constantly reinvent themselves. Optima aims to remain a pioneer on the market of tomorrow in its own particular niche: financial planning for business leaders, the liberal professions and the self-employed. Over the past few decades, a great deal of hard work has therefore gone into further refining the approach through innovative software, investments in tax law specialists and in-depth training for advisers. This is a never-ending task.