FAIS Ombud Annual report highlights the need for TCF
During the 2019/2020 financial year the Office of the FAIS Ombud received a total of 8835 new complaints - a reduction of 5.23% from the 9323 received during the 2018/2019 financial year and the 10 211 received during 2017/2018.
In the report, released on Friday, the FAIS Ombud emphasises its three-fold commitment to the industry. “Firstly, to enhance the integrity of the financial services industry, secondly to educate consumers about their rights and responsibilities and thirdly, to enhance access to the office by raising awareness about its existence and mandate.” As a result, the Ombud needs to be very aware of the concerns and challenges of its two very important stakeholders, financial services providers and consumers.
What are the main themes of complaints received?
According to the Ombud’s office there is a constant voice of ‘unfair treatment’ from consumers of financial services, highlighting the need for financial services providers to understand what it means to treat customers fairly. There are clear indications that TCF will make its way into the draft consolidated legislation facing financial services providers. In spite of its long history, this concept, and others, are still prevalent judging by the many instances where complainants provided genuine allegations of breaches of this regulatory cornerstone.
The second theme relates to the suitability of products. This specifically happens in the retirement space where the mismatch between the needs of the consumer and the product recommended results in the tragic loss of retirement funding for the elderly when they can no longer earn an income. In this regard, the Code of Conduct has been amended to highlight the need for establishing the client’s needs, requirements, risk appetite, financial product knowledge and ability to make an informed decision before providing advice relating to investment in a particular financial product.
A third theme identified is the manner in which products are marketed. This applies particularly to Endowment Policies which, while advertised as investments, do not satisfy the requirements of the customer who clearly focuses on the investment properties of the product without understanding the policy features thereof. This is further aggravated by the failure of financial services providers to maintain appropriate records of advice. “The tick-box exercise that is rife in this aspect does not help the financial services provider at all in complying with the requirements of the Code of Conduct,” the Ombud points out.
(The introduction of “execution of sales”, unless much more rigorously defined and monitored, is likely to exacerbate this problem considerably - editor)
Unpacking the figures
●During the financial year the Office of the FAIS Ombud received a total of 8835 new complaints.
●A total of 5750 complaints fell within this Office’s mandate, which equates to 65% of all complaints.
●81.76% of all complaints were resolved within a period of 3 months, 91.18% within a period of 6 months, and 96.25%% closed within 9 months of receipt.
●A total of 4790 complaints were dismissed in favour of the respondents, and 2599 complaints were referred to the appropriate fora.
●A total of 1850 complaints were settled or resolved in favour of the complainant, which compares favourably to the 1871 complaints settled/resolved during the 2018/2019 Financial Year.
●The settlement value decreased from R66 668 302 during the 2018/2019 financial year to R57 263 775 during the 2019/2020 Financial Year.
●The majority of complaints received (29.77%) were from the long-term insurance industry, with short-term insurance complaints a close second at 27.72%.
●Complainants domiciled in Gauteng remained the source of the majority of complaints received by this Office, with 41.74% of all complaints being received from this province, which was followed by Kwa-Zulu Natal and the Western Cape at 12.67% and 12.50% respectively.
Click here to download the statistics of the Annual Report.
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