Can I get redress for bad advice from the FAIS Ombud?

Financial products and services sometimes disappoint and may leave you out of pocket – your insurance claim may have been rejected or an investment may have turned sour.

If you can attribute your loss to the fact that the financial adviser you dealt with did not take your personal circumstances into account, misled you about a product’s performance or did not fully explain a product’s terms and conditions, you can lodge a complaint free of charge with the Ombud for Financial Services Providers, widely known as the FAIS Ombud.

If your complaint is valid, the ombud can award compensation of up to R800 000.

FAIS requirements

The Financial Advisory and Intermediary Services (FAIS) Act governs advice services related to the sale of financial products to South African consumers.

It requires that all advisers, insurance brokers, financial services companies and representatives of such companies (hereafter referred to simply as “advisers”) be licensed in the range of financial products they can sell you.

The Act also imposes strict conditions on how they deal with you, ensuring significant protections for you as a consumer.

Advisers must meet the Act’s “fit and proper requirements”, which prescribe minimum qualifications and levels of product knowledge and experience, require that advisers are in good standing in the financial services industry and that they act with honesty and integrity.

They are bound by the General Code of Conduct under the Act which, among other things, requires that:

• Information provided is factually correct, avoids uncertainty or confusion and is not misleading;
  
  
• Advice is appropriate to your circumstances, risk profile and financial needs; Read more: What is my risk profile and why does it matter?
  
  
• Forecasts on product performance are reasonable and for illustrative purposes only;
  
  
• The terms and conditions of any products recommended – including exclusions, waiting periods, penalties, excesses and circumstances under which benefits will not be provided – are fully explained to you;
  
  
• Any commissions, remuneration or incentives the adviser receives in relation to products or services provided are disclosed to you;
  
  
• Advisers avoid or, as far as possible, mitigate conflicts of interest between themselves and you, the client; and
  
  
• Advisers keep a record of written and verbal advice to you.

Read more on the legal requirements for financial advisers: How can I find a good financial adviser?

The Office of the FAIS Ombud

The Ombud for Financial Services Providers is a statutory body constituted under the FAIS Act to provide an independent dispute resolution service for consumers with complaints about financial services. Its mission is “to promote consumer protection and enhance the integrity of the financial services industry by the fair and expeditious resolution of complaints, informally and free of charge”.

The complaint process

The FAIS Information Leaflet, available on the FAIS Ombud’s website explains the complaints process in detail. Below is a summary:

• You can file a complaint against an adviser (or financial services company) if you believe the adviser treated you unfairly or caused you loss or inconvenience through contravening the FAIS Act or through negligence.
  
  
• Before approaching the ombud, you must try to resolve your complaint with the adviser or provider concerned.
  
  
• The claim limit per complaint is R3.5 million. If your loss is greater than this, you need to agree in writing to forfeit the part that exceeds R3.5 million. The Ombud Council is currently considering increasing this limit.
  
  
• You may not lay a complaint if you have taken legal action against the adviser.
  
  
• If the ombud’s office believes your complaint has merit, it will proceed by asking the adviser to provide a response.
  
  
• The office may ask for additional information from either party, if necessary, and weigh all the written evidence.
  
  
• It will first try to resolve the matter through a negotiated settlement between you and the adviser.
  
  
• If a settlement is not reached or the ombud’s recommendations are not accepted by either you or the adviser, the ombud may make a final determination.
  
  
• The determination may dismiss the complaint or may uphold it partially or wholly in your favour by awarding you an amount as fair compensation for your loss.
  
  
• You or the adviser may appeal the determination through the Financial Services Tribunal.

When you don’t have a case

You cannot lay a complaint against someone who is not a registered financial services provider (FSP). For this reason it is essential that, before you deal with anyone offering you a financial product or service, you make sure they have a valid FSP number, which means they are authorised to advise on and sell the products for which they have licence.

You cannot complain about poor performance in an investment product unless the adviser guaranteed performance that was not met or unless the level of risk in the investment was inappropriate to your circumstances. For example, if you are a pensioner entirely dependent on an income from your life savings, you may have a valid complaint against an adviser who put your savings in an investment with a high risk of capital loss.

On the other hand, if you are a young investor with a long-term unit trust portfolio, you wouldn’t have a case against your adviser if he or she explained to you that you were investing in the financial markets that could go up or down, and the markets subsequently fell causing the value of your investments to drop by several percent.

What happens once you have a determination?

A FAIS Ombud determination has the same legal status as a civil court judgment, which means if the adviser in question does not comply with the determination, you can approach the court or sheriff of the court to enforce it.

The determination is sent to the court with jurisdiction over the matter: a Magistrate’s or High Court, depending on the amount awarded, typically in the district where the contract was signed.

However, the determination must first be filed as a judgment by the court before it can be enforced. You, as the complainant, may have to do this yourself if the court has not yet recorded the determination as a judgment.

How to lodge a complaint

To initiate a complaint, click on “Lodge a Complaint” on the homepage of the ombud’s website. After registering on the website, you will be asked to provide details about yourself, the adviser or financial services firm in question and the nature of the complaint. See the Portal User Guide for step-by-step instructions on how to file a complaint online.

For contact details of the FAIS Ombud, see Where to complain