Be careful what you wish for
It is often said that you must be careful what you wish for because you just might get it and find out that you really do not want it. In a recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), the complaint is confined to a dispute over fees and related charges and the provision of certain material information by the respondent. It is common cause that the complainant was accountable for his own investment decisions.
We summarised the determination for you but you can download the original determination here.
Some background
During 2007, Arnold Cornelissen, the complainant, was the Chief Operations Officer of a company called Transtel. This company was acquired by another corporate, being Neotel.
At that stage, Mr Neels Brink’s (an employee of the respondent - PSG Konsult Corporate) previous company, NNB Financial Services was engaged by Neotel as their designated financial adviser. The appointment was to advise on the Neotel retirement fund and medical scheme.
Early in 2008, Neotel began the process of acquiring Transtel. NNB was requested by Transtel to advise on employee benefits. Brink made a presentation and prepared information packs for the employees of Transtel. More than 200 employees accepted Brink’s offer, including Cornelissen. This is how the relationship was established.
Cornelissen requested to use Brink’s services to preserve his own funds. To this end, Cornelissen renegotiated Brink’s advice fee by decreasing it from 0.50% to 0.30%. Cornelissen indicated to Brink that he also had discretionary money that he would like to invest using Brink’s services. Brink pointed out that he does not normally handle discretionary funds.
Relationship turns sour
Cornelissen’s response was that he merely needed access to the platform and will manage the portfolio himself. He stated that he did not expect Brink to provide investment advice.
Cornelissen and Brink had a good relationship until November 2011 when Cornelissen was requested by the respondent to make different arrangements for advisory services. It is then that Cornelissen started, what he calls, a detailed investigation of his investment account.
According to Cornelissen he found a number of items with which he did not agree to and attempted to resolve his problems through correspondence with the respondent. The meeting was unsuccessful and Cornelissen was advised to file a formal complaint.
The complaint
Cornelissen complains that the respondent failed to inform him appropriately with regard to some of his investments and failed to take instructions, thereby causing loss.
In summary, Cornelissen said he was charged costs against his equity based investments that were placed with Brink at a rate ranging between 1.1% and 4.55%. This resulted in what Cornelissen describes as, a negative financial impact. He seeks restitution in respect of other amounts from the respondent in a total amount of R200 300. He also claims interest on that amount at the rate of 6% per annum.
The respondent responds
The agreement relied on by the complainant was with NNB then represented by Brink. The respondent argues it was not a party to that agreement and cannot be liable in contract for any advice given by NNB. Further, when the respondent acquired NNB, it was a term of the contract that the respondent will not be liable for any claims that pre-dated the effective date of the acquisition.
The respondent points out that the complainant was aware of the rates charged since 7 July 2008 but made no objection to the fees charged until after 6 July 2011.
The respondent denies that there was a unilateral change in the agreed fee base and/or non-communication of substantial changes and points out that the agreed rates were applied and that there was no credible evidence that this was exceeded. The respondents point out that the complainant neglects to take the contractually agreed platform and adviser fees into consideration when formulating his calculations.
The respondent points out that the complainant’s case is based on subjective interpretation and his own calculation of how much he was allegedly overcharged. This makes it difficult to objectively pin point exactly what his issues are; making it difficult to respond.
The respondent disputes all of the complainant’s calculations on the basis that his input figures are not supported by credible evidence.
No end in sight
According to the Office, the problem begins with the fact that there is no agreement over the source figures used by the complainant. There is also disagreement as to the method of interpretation and application of fee charges across the various investment options. In this regard, the FAIS Ombud says the respondent is equally unhelpful by not being able to find any common ground regarding these calculations.
This dispute, according to the FAIS Ombud, cannot be reasonably dealt with in this Office as the parties require an adversarial hearing to resolve material disputes of fact. Therefore, the complaint is not finally determined.
In terms of section 27(3) (c) of the Act, it is appropriate that this complaint be dealt with by a court.
Editor’s Thoughts:
The complainant mentioned that he needed access to the investment platform and will manage the portfolio himself. With this, can we say that the complainant was accountable for his own investment decisions? What would you say is the biggest problem here? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
