FAIS Ombud releases its Annual Report for the financial year 2019/20120

04 December 2020 Office of the Ombud for Financial Services Providers

We Hear You

On Friday 4 December 2020, the Office of the FAIS Ombud will launch its Annual Report for the 2019/2020 Financial Year. In acknowledging the risks posed by the COVID-19 pandemic that continues to affect the lives of many of our fellow South Africans, the launch of this year’s annual report will be virtual with only a handful of panellists that will engage with the industry from the office premises. The launch will provide information on the performance of the Office of the FAIS Ombud during the financial year as well as its financial affairs.

The opening words of the statutory mandate of the Ombud for Financial Services Providers (“the FAIS Ombud”), as set out in Section 20(3) of the FAIS Act, requires the Ombud Office to “…consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable in all circumstances…”.

Following on from this, the Office of the FAIS Ombud has a three-fold commitment to the industry, firstly to enhance the integrity of the financial services industry, secondly to educate consumers about their rights and responsibilities and thirdly, to enhance access to the office by raising awareness about its existence and mandate. In order to perform on all three elements of the commitment, the Ombud needs to be very aware of the concerns and challenges of its two very important stakeholders, that is: the financial services providers and the consumers of such financial services and products.

It is on this basis that the FAIS Ombud Office needs to continue in all its previous efforts in order to strengthen its footprint and follow through with respect to its efforts. Accordingly, and following through from the previous year’s theme titled ‘Change’, the Ombud’s office has recognised and embraced the changes that have flowed from pieces of regulatory legislation, both, those already in force and those which are still in draft.

The theme for the 2019/2020 Financial Year was ‘We Hear You’ and in doing so, the Office of the FAIS Ombud cannot help but hear a constant voice of ‘unfair treatment’ from consumers of financial services, highlighting the need for financial services providers to understand what it means to treat customers fairly. This is a concept that has its origins in the Code of Conduct for Financial Services Providers (“the Code of Conduct”) and is now interwoven into Treating Customers Fairly (“TCF”), with clear indications that it will make its way into the draft consolidated legislation facing financial services providers. In spite of this long history, this concept, and others, are still unclear having regard to the many instances where complainants come forward with genuine allegations of breaches of this regulatory approach.

Another voice that is heard by the Office of the FAIS Ombud relates to the suitability of products marketed to and taken up by consumers. Once again this is an old concept which, although also emphasised in the TCF Outcomes, has its origin in the Code of Conduct. This continues to rear its head in the retirement space where the mismatch between the needs of the consumer and the product recommended results in the tragic loss of retirement funding for the elderly who can no longer earn any income.

The manner of marketing of products by financial services advisers is another area where the Ombud’s Office is hearing unhappy voices. This is particularly rife with reference to Endowment Policies which, while advertised as investments, do not satisfy the requirements of the customer who clearly focuses on the investment properties of the product without understanding the policy features thereof. This is further aggravated by the failure of financial services providers to maintain appropriate records of advice. The tick-box exercise that is rife in this aspect does not help the financial services provider at all in complying with the requirements of the Code of Conduct.

The above notwithstanding, it is however encouraging that for the financial year under review there was an increase in the number of complaints that fell within the mandate of the Office of the FAIS Ombud. Further, the statistics following will show that the majority of the settlement value that was attained was from informal settlements that resulted from conciliation processes facilitated by the Office of the FAIS Ombud between financial services providers and consumers. This is an encouraging turn which this Office hopes will persist as it demonstrates improved relations between financial services providers and their customers. Such a development is a strong ingredient for the enhancement of the integrity of the financial services industry.

During the financial year the Office of the FAIS Ombud received a total of 8835 new complaints a reduction of 5.23% from the 9323 received during the 2018/2019 financial year. However, as alluded to above a total of 5750 complaints fell within this Office’s mandate, which equates to 65% of all complaints received during the financial year. Not only is this percentage of complaints received higher than the 60% achieved during the 2018/2019 Financial Year, but despite the overall reduction in complaints received, the 5750 complaints that the Office of the FAIS Ombud received that fell within its mandate exceeded the 5589 received during the preceding financial year. This is an encouraging development that is showing no signs of slowing down, and this Office expects to exceed this even further during the 2020/2021 Financial Year.

In keeping with our legislative mandate to resolve complaints in an expeditious manner, 81.76% of all complaints are resolved within a period of 3 months, 91.18% within a period of 6 months, and 96.25%% closed within 9 months of receipt.

Of the 9 252 complaints resolved during the 2019/2020 Financial Year, a total of 4790 complaints were dismissed in favour of the respondents, and 2599 complaints were referred to the appropriate fora. A total of 1850 complaints were settled or resolved in favour of the complainant, which compares favourably to the 1871 complaints settled/resolved during the 2018/2019 Financial Year. In addition to this we can also report that this Office achieved an overall settlement ratio (Inclusive of determinations), of 30%, which compares favourably with industry standards. The settlement value however decreased from R66 668 302 during the 2018/2019 financial year to R57 263 775 during the 2019/2020 Financial Year. This decrease was largely due to the reduction in the number
of determinations issued (13), meaning that it was driven by informal settlements that resulted from conciliation processes facilitated by the Office of the FAIS Ombud between financial services providers and consumers.

Of the 8835 complaints received during the 2019/2020 Financial Year, 2467 were referred to other fora. This represents 27.92% of all complaints received by this Office. The referral of complaints to other fora remains an important aspect of the service provided by the Office of the FAIS Ombud as this demonstrates the continued commitment to promoting access to justice by appropriately assisting any person who submits a complaint to this Office.

The number of complaints dismissed by this Office, which totalled 3745, represented 42.39% of all complaints received by the Office of the FAIS Ombud during the financial year. This Office is required by law to provide detailed reasons for any decision made inclusive of complaints dismissed. Furthermore, all who feel aggrieved by decisions taken by this Office can approach the Financial Services Tribunal with an application for the reconsideration of such decision. During the 2019/2020 financial year a total of 159 applications for reconsideration were made to the Financial Services Tribunal, and of the 144 matters decided upon by the Tribunal as at 31 March 2020, 138 of those applications were dismissed with only 6 being referred back to this Office for further investigation. This reflects a success rate of 95.65% and demonstrates the level of fairness and impartiality exercised by the Office of the FAIS Ombud in the investigating and adjudication of complaints.

In a departure from previous years, the majority of complaints received making up 29.77% were from the long-term insurance industry. However, the concerns surrounding the provision of short- term insurance policies and the failure of FSPs in that sector to embrace the provisions of the FAIS Act and its corresponding General Code of Conduct for Authorised Financial Services Providers and Representatives remains and the short-term insurance complaints were a close second at 27.72%.

Complainants domiciled in Gauteng remained the source of the majority of complaints received by this Office, with 41.74% of all complaints being received from this province, which was followed by Kwa-Zulu Natal and the Western Cape at 12.67% and 12.50% respectively. This once again underlines the importance of increasing awareness of the existence of the Office of the FAIS Ombud to other provinces. Especially those provinces with smaller metropolitan areas such as the Eastern Cape, Northern Cape and Limpopo. The core component of this Office’s mandate can only be effectively achieved when all South Africans and consumers of financial services are aware of this Office and the service, we provide.

Whilst the annual report focuses specifically on how the Office of the FAIS Ombud disposed of complaints during the 2019/2020 financial year, it would be remis not to make mention of, what is commonly referred to as “property syndication complaints”. Whilst it is well documented that the investigation of complaints against FSPs as a result of investments made into property syndication schemes has encountered numerous impediments over the years, the Office of the FAIS Ombud remains committed to utilising whatever limited resources it has to finalising these long outstanding complaints. The 2019/2020 Financial Year once again saw a reduction in the number of these outstanding matters to reduce this number to 1114 as at 1 April 2020.

The Office of the FAIS Ombud would like to acknowledge the contribution made by its staff whose efforts remain crucial to the continued success of the Office, and to the many entities and individuals who assist the Office in achieving its mandate.

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