Has TCF made the FAIS Act superfluous?

Richard Rattue, Managing Director, Compli-ServeSA.

Many advisers are frustrated with the ongoing increase in legislation and regulations they have to comply with which have seen an inevitable increase in the cost of doing business over the last few years. One of the more comprehensive initiatives has been Treating Customers Fairly (TCF) which seeks to ensure that customers get a fair deal. There appears to be some market sentiment that TCF will be legislated leaving the FAIS Act superfluous to requirements; but is this really the case?

The short answer is ‘of course not’. To begin with, TCF is a regulatory framework, not actual legislation. While it would be wonderful if all that was needed to ensure that customers are always treated fairly is a principles-based framework like TCF, this is hardly the case.

Late last year, the FAIS Ombud celebrated its 10th anniversary, and reported that the growth in complaints continues to be concerning. In its first year of operation, the Ombud’s office received 3,806 complaints. According to their latest annual report, the Ombud received almost 9,439 complaints. The short-term insurance industry contributed close to 3000 of these complaints, and the long-term insurance industry came in second at just over 2500, while the investment sector contributed close to 1500 complaints.

The high number of complaints shows that the need for redress through avenues like the Ombud is real.

The ongoing increase is not entirely due to increased malfeasance on the part of advisers; it is also a function of the fact that consumers have become more aware of their rights since the advent of FAIS. However, inefficiencies and inequalities in the market that cost people money and time still remain.

Does the increase in complaints suggest that FAIS has failed? Hardly. No piece of legislation is an exact science; FAIS is still important because the foundations it was built on have not changed. There is still a strong need to ensure that customers receive fair, professional services, understand what they’re buying and they’re charged a fair amount.

While it is rumoured that changes to the FAIS Act are being considered, whatever comes out in the end will likely still look and smell like FAIS i.e. will have fair treatment of clients close to the heart.

The FAIS Act has changed the financial services landscape over the last 10 years and made financial services a safe place for consumers.