The Financial Advisory and Intermediary Services (FAIS) Ombud released its Annual Report for the period 2016/2017. The Report provides insight on topics such as:
- a summary of complaints received by the Ombud;
- the settlements that were agreed to and various statistics;
- Financial Statements of the Ombudsman;
- the Accounting Authority’s Responsibility and Approval in terms of the Public Finance Management Act, 1999, and;
- the Governance, Risk and Compliance Report.
10 846 complaints were received by the Office of the FAIS Ombud, exceeding 10 000 for the first time in one financial year. However, only 5 630 of these complaints fell within the ambit of the FAIS Ombud.
Below are the percentage of new complaints by product type received by the FAIS Ombud in 2016/2017:
One of the trends the FAIS Ombud identified was the violation of the provisions of the FAIS Act and the General Code of Conduct by some FSPs operating in the short-term insurance space. We highlight two of the FAIS Ombud’s main points in this regard:
- Advisors provide “the most affordable premiums possible regardless of the implications for the client, who might only in the event of a claim find out what the true cost of the lower premium is. This true cost could include a reduction or exclusion in the cover provided or the numerous additional excesses payable”.
- The Ombud’s main concern is “the persistent refusal by FSPs operating in this area to obtain all relevant and available information from the prospective client.” She states that there seems to be a preference for “a single need” which often short changes clients. The Ombud is of the view that this term is used by FSPs to circumvent the requirements of the Code. She states that “FSPs argue that there is no need to obtain all relevant and available information and by extension, no need to conduct a needs analysis for the client.”
We recommend that FSPs who deal in short term insurance products take time to read the Ombud’s full comments in the report. This can be used as the basis to review the advice process followed, to ensure full compliance with the requirements and fair treatment of customers.
Other trends discussed relate to retirement planning, disability, critical and severe illness cover.
The Report also provides advisors with helpful lessons from cases which were settled.