Moonstone Monitor: Standardised disclosure: A pipe dream?

Pre-FAIS marketing material had only one goal; to assist the advisor to conclude the sale.

From October 2004 there is a legal obligation (and in our opinion also a moral one) on product houses to provide intermediaries with point of sale material which will enable them to assist their clients in making an informed decision. Although the focus shifted from the sale to advice not much effort went into changing the content of marketing material – it remained “sales aids.”

The FAIS Ombud pointed out in a number of determinations that all relevant information has to be disclosed before the contract is signed, and ruled against companies who omitted material information such as exclusions which were only contained in their contracts which the client received after the event.

In most instances, however, it was the FSP who copped the blame.

We have just seen the first real effort to address this issue with the announcement by ASISA that its members will have to conform to standardised disclosure on critical illness benefits. It is critical that this example is followed by other product providers, including healthcare and short-term companies.

While some product houses, notably Hollard, Altrisk and Allan Gray have taken steps to simplify the wording of sales material and contracts, there was a degree of unwillingness by some to become party to a uniform disclosure document.

We understand the need to cover oneself through legalise, but there has to be way in which the client can be told in simple terms what his money is going to buy him.

A major objection we experienced when speaking to product houses about such documentation was that it would rob them of the opportunity to highlight their unique selling points.

This issue is addressed in the new agreement between life offices in that broad parameters are provided within which there is still space for individual differences. This document can become the blueprint for a new dispensation which was also suggested by National Treasury in March 2006 in their discussion document on contractual savings.

Non-disclosure by the intermediary is a frequent reason for findings against them by the Ombud, and one has to wonder how many of these could have been prevented if compliant sales aids had been available.

It would be interesting to see how the Ombud would react if the respondent were to provide proof of such non-compliances in his defence.