Financial advice ombud awards R60.8m to consumers in one year
Office of the Financial Advisor and Intermediary Services Ombud releases its annual report
The financial advice ombud has awarded relief of R60.8m over the past financial year to consumers who complained about financial services and products, up from R58m the year before.
In its annual report released on Friday – the last under the auspices of the replaced Financial Services Board (FSB) – the office of the Financial Advisor and Intermediary Services (FAIS) Ombud said that despite challenges and a slight decrease in the number of complaints received, it viewed the increase in the actual rand value of relief awarded to consumers as a sign that South Africans have faith in the ombud and understand the value of using the service to access justice.
In the year under review, the ombud resolved 10,452 complaints, of which 2,799 were referred to other ombuds or adjudicators, 6,303 were dismissed and 1,400 were settled. Most complaints were once again directed at short-term insurers, with 3,243 complaints. This was followed by long-term insurance complaints (3,100) and investments, with 1,231 unhappy consumers.
In the report, outgoing ombud Noluntu Bam said: “It is an undisputed fact the FAIS Ombud has changed the way the financial services game is played.” Bam has since been replaced by Naresh Tulsie, who took office on May 1 2018.
The FSB ceased to exist at the end of March 2018. On April 1, the Financial Services Conduct Authority (FSCA) and the Prudential Authority were established in what is commonly referred to as the Twin Peaks model. Bam said in the report that policymakers were working to simplify and consolidate the various ombud schemes. “Although there are bound to be changes in the governance lines, the FAIS Ombud should continue its great work,” Bam said.
They trusted us with their stories, knowing that we would treat them in confidence and not undermine the seriousness of their pain
The FAIS Ombud exists to investigate and resolve complaints according to rules promulgated under the FAIS Act. Consumers who feel they have not received fair treatment can approach the ombud to settle disputes at no cost. According to the FAIS Ombud website, “a complaint must relate to a financial service rendered by a financial services provider or a representative of the provider”. The ombud can only make awards of up to R800,000.
The role of the ombud is to provide a fair and independent resolution to a dispute. “I would like to highlight that, in the pursuit of justice, it does not matter to consumers that the result may not favour them. They trusted us with their stories, knowing that we would treat them in confidence and not undermine the seriousness of their pain,” Bam is quoted as saying in the report, highlighting public trust in the ombud’s office, which received another clean audit for the period under review.
The 2017–18 report contains case studies of complaints the ombud resolved, ranging from insurance providers to financial advisers. A common theme in the complaints relates to service providers failing to make sure that consumers understand the fine print in every contract they enter into with service providers. In other words, the onus is on the provider of financial services to ensure that all possible exclusions and conditions, as well as implications such as tax, are clearly explained.
By March 31 2018, the ombud reported that 97.74% of customers rated their satisfaction with services as positive, compared with a 2017–18 target of 80%. The ombud set a target of closing 85% of complaints within nine months of receiving them, but was able to close more than 90% of complaints within the stipulated timeframe.
Each quarter saw the ombud “satisfy” more than 90% of customers in respect of “ease of access to the office [of the ombud]”, while in each quarter more than 98% of complaints received a response within seven days of the ombud receiving the complaint.
Despite highlighting successes of the ombud, the report also acknowledged mistakes made by the office as it was “found to have inadvertently straddled lanes in pursuit of justice” relating to cases in 2015, and in which the High Court ruled against the ombud in 2017.
The ombud acknowledged a major setback in its Relative Value Arbitrage Fund (RVAF) cases. The founder of the RVAF, Herman Pretorius, killed himself and his business partner Julian Williams in 2012, and the court ruled the fund was a scam.
“We experienced a major setback when the Appeals Board overturned a decision involving the [RVAF] cases after upholding previous decisions over a number of years,” Bam writes in the report.
The FAIS Ombud is opposing a high court review involving the RVAF.