Self-reflection is a very valuable exercise as it encourages self-improvement. This is done on a number of platforms at an industry level when industry organisations reflect on the year that was during their annual reports.
A busy year
The Financial Advisory and Intermediary Services (FAIS) Ombud released its annual report on 11 November and Noluntu Bam, the FAIS Ombud, pointed out that it was a busy year.
“Our greatest task over the past year has been to resolve complaints in terms of our mandate and to do so in a way that creates shared value for all our stakeholders. The combination of increasing consumer complaints and operational demands that are inevitable in a growing organisation have created a challenging yet stimulating environment for complaints resolution,” said Bam.
She added that the Ombud has taken to account lessons that the Ombud has learnt from the issues that it has been confronted with and has constantly endeavoured to enlighten those that it serves.
For the past five years, the Financial Services Board (FSB) has been on a mission to improve service levels in the industry.
This is regulated by the outcomes defined in the FSBs Treating Customers Fairly document. However, certain insurers - and advisers - still provide inappropriate advice.
"Many complaints which appear to be about contractual terms have their origin in unsound or inappropriate advice. While there may seem to be no correlation between advice and access to the office, consider the example of a bank customer who entrusted proceeds of her immovable property while house hunting for a smaller home,” said Bam
In less than three months she had found the home, she signed an offer to purchase and went to the bank to retrieve her funds, only to be told that she was bound by the contract she had signed, which effectively saw her money being invested in an insurance product and had to remain in that position for ten years.
She was made to sign forms acceding to heavy penalties, after which the remainder was paid into her account. The bank employee she was dealing with did not direct her to the FAIS Ombud because the consumer was in breach of the contract. It was the consumer’s persistence to see justice being done that led her to the FAIS Ombud. Following a review of the complaint and subsequent decision by this office, the bank had to pay back the penalties confiscated from the consumer’s investment.
Taking advantage of the elderly
During the year under consideration, the FAIS Ombud saw a significant spike in complaints involving retirement savings.
“An examination of the complaints reveals that complainants were in need of accessing their retirement savings for a variety of reasons. Some of the consumers had lost their homes, had their lifestyles compromised, or claimed to have impaired health, as a result of inappropriate advice,” said Bam.
She added that a significant number of consumers have lost their life savings following advice to invest in complex investments like public property syndications.
“Although the financial advisers involved boasted decades of service in the financial services industry, including being licensed by the regulator, it has been found that they knew very little about these investments and were not in a position to adequately advise their clients of the risk of losing their capital,” said Bam.
Clearing the RVAF
The Ombud also spent the year clearing the remainder of complaints relating to the infamous Relative Value Arbitrage Fund, (RVAF).
The investments were sold to clients on the basis that they carried little or no risk, were unique and not affected by financial market movements because they relied on the skill and smart manoeuvring of the traders. Like property syndication investments, RVAF was marketed to the elderly.
“Following the collapse of the fund, financial advisers sought to distance themselves from the consequences of their advice. There is no question; appropriate advice is indispensable when it comes to dealing with financial products. Yet to many consumers, financial advice remains mythical until they come face to face with the consequences of poor advice,” concluded Bam.
Unfortunately rotten apples do exist in the industry and the new Ombud will need to be a broom that sweeps clean if we want to move towards an industry that is rid of this. However, there are advisers in the industry who do their best for clients every day. Perhaps the Ombud should also start highlighting success stories. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts email@example.com.