The complaint arose when the complainant learnt that his investment funds were placed into a retirement annuity and would be tied up meaning he would have no access to his funds until he retires. The complainant alleged that he did not give the FSP any instruction to do so as he was out of the country at the time of his funds being placed into the retirement annuity.
The complainant worked in South Africa, but resigned to take up employment abroad. When he resigned, his pension funds became available. When he was abroad, he learnt that his funds were placed in a retirement annuity with Old Mutual. He complained to Old Mutual, whereby they correctly responded to him that his complaint was a matter between himself and his independent FSP, and that they were prevented by legislation from releasing his funds.
According to the complainant, he instructed his advisor to invest his funds in a manner that he could have access to it within reasonable notice of 1 to 3 months. He states that he did not give his advisor specific instructions to place the funds into a retirement annuity. Before the complainant left the country, he instructed his mother-in-law to oversee some of his financial affairs as she is a secretary to one of the representatives of the FSP against which the complaint is lodged. He therefore instructed her in an email to take care of his pension funds.
He states that he had no idea that his funds were placed into a retirement annuity until he found out about it a year later. He did not have the intention to invest his funds in an annuity as his plan was to use the funds in business where the returns would outperform an annuity. The complainant therefore requested that either Old Mutual refund his money, or that the FSP pay out an equivalent sum and recover the funds from the policy when it matures.
The advisor, on behalf of the FSP, responded to the complaint admitting that he did not hold a personal consultation with the complainant when the investment was made. The secretary, being the mother-in-law, requested the advisor to handle a transfer of the complainant’s pension. The advisor required the complainant to sign a service contract with the FSP in order to proceed, which was duly done by the complainant. The advisor is adamant that at no stage did he receive instructions from complainant to invest in a product where he could access the funds on reasonable notice. The advisor supports this with a statement from the mother-in-law who confirms this. The advisor also says that the complainant received his contract from Old Mutual which clearly states that it is an annuity.
The Ombud confirms that the issue is whether the FSP acted without an instruction or mandate from complainant before making the Old Mutual investment.
- None of the parties could produce a general power of attorney from the complainant giving the mother–in-law or the advisor unrestricted authority and discretion to invest his funds.
- There is no evidence that the complainant held a consultation with any advice giver in the FSP before the investment was made.
- There are no emails between complainant and the advisor before the investment was made.
- There is no written communication between complainant and any of the other parties regarding the manner in which complainant preferred his funds to be invested.
- There is an appointment letter appointing the advisor as complainant’s advisor, which is signed by the complainant.
- There is a record of advice, which includes the client objective as transferring pension funds over to Old Mutual, with the same information being recorded under ‘Financial Needs’. The advisor and the complainant signed at the end of the document.
- There is a Client-Service Level Agreement which is initialled on each page and signed in full by the complainant.
- Lastly, there is a risk assessment document signed by the complainant and the advisor.
- Old Mutual provided record that a quote was requested by the advisor on 11 July 2012. This was therefore before the risk assessment was done.
- There is a document from Old Mutual, the ‘Finalisor Declaration’, which is signed in full by complainant on 11 July 2012.
The Ombud ruling:
All documents were provided to the complainant in order for him to explain his signature on these documents. What is of significance is that the complainant did not dispute that his signature and initials appear on all of the documents. He challenges the documents saying that, “from my passport, it is clear that I have not been able to sign any documents on either 11 July 2012 or 30 July 2012, because I was on neither of these two dates in South Africa.”
However, he does not say that it is not his signature. He does not admit or deny that he received the documents, nor does he deny that he signed them. The Ombud highlighted that complainant and his mother-in-law deliberately failed to cooperate with the Ombud and did not assist to resolve the dispute. The Ombud held that she cannot speculate why the complainant signed the documents. This matter requires an adversarial approach with documents being discovered, the parties led in oral evidence and cross examined. This procedure is available in our courts. Accordingly, the Ombud makes no finding in respect of the FSP’s conduct and the complaint is dismissed.
The Ombud stated that the documents provided by the FSP and the product provider were crucial as they supported the version of the advisor of the FSP.
It must be noted that when advice is given at a distance, there can be a greater risk to the advisor as it is more difficult to fully understand what the client wants. We would suggest that the use of technology be embraced to ensure that the advisor has some audit trail of the discussion with the client and the basis on which the advisor acted.
It is also important that if an advisor is acting on the instruction of a person authorised to represent the client, proof of their authority to do so is obtained. This case highlights the importance of FSPs keeping record of all communication and correspondence with their clients. It must also be information which is easily retrievable should there be a client complaint against the FSP. It is also recommended that FSPs ensure that their clients are properly informed at all steps of the financial process and that clients understand the product which is recommended to them, including any limitations, in order for clients to make an informed decision.