As COFI moves the industry toward principle-based regulation, leadership is no longer simply following rules but actively shaping a culture of integrity, fairness, transparency, and ethical client engagement. But what does this mean in practice? And how do different leadership styles influence an adviser’s ability to navigate these changes?

A new era of accountability

Under COFI, financial firms must demonstrate that their leadership actively promotes ethical decision-making, sound risk management, and fair client outcomes. This means:

  • Leadership is accountable for compliance: Senior managers must take an active role in ensuring regulatory adherence, rather than delegating compliance as an operational task.
  • Governance structures must support fair treatment of clients: Firms will need robust oversight mechanisms to prove they prioritise client interests.
  • A culture of accountability is essential: COFI encourages a shift from box-ticking compliance to proactive, principle-based decision-making.

The role of ethical leadership

With increased regulatory expectations, financial leaders must ensure their firms operate with honesty, integrity, fairness, transparency, and accountability. This includes:

  • Building a client-centric culture: Every decision should align with fair client treatment and ethical advice.
  • Implementing strong internal controls: Leadership must ensure that policies and procedures are effectively designed to mitigate risk and uphold compliance.
  • Encouraging continuous professional development: A well-informed and competent team is essential to meeting COFI’s evolving standards.

How leadership style affects COFI readiness

As COFI emphasises leadership accountability and cultural transformation, financial firms must evaluate whether their leadership style supports or hinders compliance readiness. The most effective leaders will likely blend multiple leadership styles to maintain a competitive advantage.

For example, a transformational leader might inspire a compliant culture but will also need transactional discipline to ensure that policies and procedures are well-implemented. Similarly, a servant leader might foster trust, fairness and transparency but will still require autocratic control mechanisms to ensure regulatory oversight.

Practical steps to strengthen leadership under COFI

  1. Assess your leadership culture
    • Conduct an internal leadership audit to determine whether current management styles align with COFI’s accountability expectations.
    • Identify gaps in governance structures and areas where ethical leadership needs reinforcement.
  2. Embed accountability at every level
    • Ensure that senior managers and directors take active roles in compliance oversight.
    • Establish a clear reporting structure where accountability is shared, not delegated.
  3. Develop a principle-based compliance strategy
    • Move beyond a rules-based approach by integrating fair client outcomes into decision-making.
    • Create internal training programs that educate staff on principle-based governance.
  4. Leverage technology for governance oversight
    • Implement regulatory technology (RegTech) to improve compliance monitoring, automate reporting, and enhance risk management.
    • Use data-driven insights to ensure leadership decisions align with COFI’s client-centric requirements.
  5. Encourage ethical leadership development
    • Provide leadership training focused on ethical decision-making, risk management, and regulatory foresight.
    • Foster a culture of continuous learning, ensuring that leadership remains adaptable to regulatory changes.

COFI marks a fundamental shift in how financial advisers, senior managers, and directors are expected to operate. Compliance is no longer just about following rules, it involves demonstrating ethical leadership, embedding accountability, and prioritising suitable and fair client outcomes.

As financial services firms navigate this transformation, strong leadership will determine success. Whether adopting transformational, transactional, servant, or autocratic leadership styles, we need to ensure that our approach supports a compliance culture that is proactive, ethical, and builds trust.

 

 

Graviton Financial Partners (Pty) Ltd is an authorised financial services providers in terms of the Financial Advisory and Intermediary Services Act,2002. The information in this article does not constitute financial advice While every effort has been made to ensure the reasonableness and accuracy of the information  contained in this article (“the information”), the FSP, their shareholders, subsidiaries, clients, agents, officers and employees do not make any  representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability  for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance  upon the information.