Why Fais Ombud finds against financial advisors

Ingé Lamprecht Moneyweb

Five sections in the Financial Advisory and Intermediary Services (Fais) Act’s Code of Conduct were instrumental in 95% to 99% of determinations against financial services providers (FSPs) by the Fais Ombud, an industry expert has warned.

Anton Swanepoel, director and chair of FIA’s Financial Planning Exco, said more than ten years after the Fais Act was implemented it seemed “ridiculous” to ask whether businesses were “Fais fit”, but Ombud decisions confirmed that the industry had not learned all its lessons.

Although the first Fais Ombud, Charles Pillai, warned years ago that poor recordkeeping was at the centre of determinations against FSPs, it’s still the case.

“I question whether our industry is actually keeping accurate records of these transactions as required by Fais … We still, as an industry, fall short when it comes to quality recordkeeping.”

Swanepoel emphasises that a record of advice is an essential part of a “Fais fit” practice.

The five sections tripping up FSPs:

Section 2 of the Code of Conduct requires FSPs to render services honestly, fairly, with skill, care and diligence in clients’ interests.

Section 3, deals with client communication and requires FSPs to ensure information sent to clients is factually correct and sufficient to help them make an informed decision.

Section 8 requires FSPs to do a suitability analysis.

Section 7 covers disclosures necessary to help clients make an informed decision.

Section 9 deals with record of advice.

Swanepoel said the record of advice covers three areas: the information the advice was based on; which insurers or investment products the FSP considered and from which product suppliers; and the FSP has to explain why they recommended the product.