Making huge strides towards an improved financial services industry
The financial services industry is an industry which sells complex products that offer basic protection against the growing inherent risks of society. The target market of these products range from the highly educated to the uneducated, and the advice provided by brokers and advisers is key to maintaining the industry’s integrity, as well as to ensure its growth.
It is therefore vital that the advice provided to potential policyholders is open, honest and free of prejudice or thoughts of maximum gain at the policyholder’s expense. The Financial Intermediaries Association of Southern Africa (FIA) has congratulated the country’s risk and financial advisers on a job well done during 2013 and the association looks forward to improving on this in 2014.
Positive signs of a highly regulated industry
The 2004 implementation of the Financial Advisory and Intermediary Services (FAIS) Act, along with its accompanying regulations, contributed to a visible change in financial advice-giving. The Act, which sets out clear guidelines on how risk and financial advisers should interact with their clients, has already delivered positive outcomes for consumers.
"The positive impact of balanced financial services regulation supported by growing professionalism through trade associations such as the FIA is evidenced by the ongoing improvement in the standard of advice-giving by our members,” says Justus van Pletzen, CEO of the FIA, "Both the regulator’s annual report, and feedback from the industry’s consumer protection schemes confirm that we are stamping out poor advice and reducing the number of questionable financial products offered through the intermediated distribution channel.”
Working towards a complaint free industry
The impact of pro-consumer legislation, such as Treating Customers Fairly (TCF), on policyholder’s can be assessed by studying the complaints statistics published by South Africa’s various consumer protection schemes.
From a financial intermediary perspective, the best place to start is the 2012/3 FAIS Ombud Annual Report. The FAIS Ombud was established in terms of the FAIS Act to facilitate complaints by consumers against intermediaries and can award compensation of up to R800 000.
The FAIS Ombud received 9 949 new complaints in the period under review. Of the 9 033 complaints that were finalised during the year, 4 550 (50.4%) were referred to financial institutions or other Ombudsman schemes, 3 096 (34.3%) were dismissed and 1 354 (15%) were settled. There were only 33 determinations against financial services providers in the year.
Advisers play an important role in assisting consumers in choosing and interacting with private medical schemes too. It is the medical scheme broker who has to guide South Africa’s policyholders on the best scheme and benefit option combination for their needs.
The latest Council for Medical Schemes (CMA) Annual Report reveals that there are 3.8 million main medical scheme members, and 4.8 million dependents, belonging to 92 private medical schemes. It also shows that only 1 out of 4 651 complaints received by the Council in the 2012/13 year was a result of incorrect advice by brokers.
These statistics are similar to those found at the Ombudsman schemes that hear complaints against South Africa’s short-term and life insurers. There were only 9 123 consumer complaints to the Ombudsman for Short-Term Insurance (OSTI) over the latest year, despite millions of private and commercial policyholders.
The Association for Savings and Investments (ASISA) notes that 86% of South Africa’s 5.1 million new recurring premium policies invested in by the public in the six months to 30 June 2013 were introduced either by independent financial advisers or so-called tied agents. When you consider that only 9 592 complaints were brought before the Ombudsman for Long-Term Insurance, it is clear that the overwhelming number of transactions take place without a hitch.
Effective complaint channels
The main aim of the industry is to provide products and services which best suit the needs of the industry and will result in minimal complaints. However, this is impossible as there will always be some policyholders who do complain. Therefore, effective channels need to be provided to facilitate this.
"The statistics confirm that bad advice exhibits in only a handful of the financial services transactions concluded each year,” says Van Pletzen.
He adds that financial services consumers who have already benefited from the decade-long application of FAIS will soon enjoy additional protection thanks to six TCF principles that will be entrenched in financial regulation by 2016.
"The Financial Services Board (FSB) is introducing TCF to ensure that consumers are sold an appropriate product with appropriate service when they purchase investments, life assurance or short-term insurance,” concludes Van Pletzen. "It aims to establish a culture of fair treatment of consumers at every company involved in the design, provision or distribution of an insurance or investment product.”
Editor’s Thoughts:
There
is no doubt that brokers and advisers contributed significantly to the improved
performance of the industry. However, the number of determinations in 2013
increased over those in 2012 and this needs to be resolved. Perhaps the furore
over new regulation, which could possibly improve the industry significantly,
is a harsh criticism? Please comment below,
interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
According to the Oxford Dictionary a CLIENT is a "person using services of lawyer, architect, or other professional person; (a) customer" and
a CUSTOMER is a "person who buys goods or services from a shop or business; colloq. person one has to deal with."
Irrespective of the meanings of the words it seems to me that a Client is a Customer and a Customer is a Client and should be treated fairly at all times.
I think that the product providers should keep in mind that we are also Clients/Customers! Report Abuse
The word "customer" is not to be found anywhere in the Act or supporting legislation.
There is a significant difference in the meanings of these two words.
My interpretation of the Act leads me to think that Treating Customers Fairly will apply only to product suppliers - not to those who render professional services.
Or is the FSB like Lewis Carroll's Humpty Dumpty?
"When I use a word," Humpty Dumpty said in rather a scornful tone. "It means just what I choose it to mean - neither more or less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master - that's all. Report Abuse