A signed disclosure document does not necessarily mean a client received suitable advice.
FAIS Ombud Advocate John Simpson discussed two life annuity complaints during a briefing on the Office’s 2025/26 annual results. The cases, which feature in the Ombud’s case summaries, involved questions about the suitability of retirement advice and whether clients had been properly informed about the restrictions attached to the products they purchased.
The cases are among the summaries available in the searchable Complaints Archive on the FAIS Ombud’s website. Simpson said the Office had made the summaries public to provide guidance to consumers and financial services providers.
The archive allows users to search for complaints dealt with by the Office. It covers a range of financial products and services, with new summaries added regularly. While many matters are resolved through settlement, some summaries also reflect findings in favour of providers where the Office believes the outcome offers useful guidance.
In the first annuity case, a man who retired due to ill health died shortly after buying a single life annuity, leaving his unemployed wife and minor children without a remaining benefit. In the second, a woman discovered that she could not withdraw capital from a life annuity after using her retirement proceeds to buy the product.
An annuity that left a family without provision
In the first case, identified in the FAIS Ombud’s 2025/26 annual report as TvS, a man bought a single life annuity when he retired in October 2020. He died shortly afterwards, leaving his unemployed spouse and minor children without a remaining benefit from the annuity.
His wife complained that the advice was unsuitable. Given her husband’s ill health and the family’s financial dependence on him, she maintained that he would not have chosen an option that made no provision for them after his death.
The provider produced signed disclosures and other documentation. However, it could not demonstrate that it had conducted a proper financial needs analysis or adequately considered the client’s personal and financial circumstances, including the needs of his dependants.
Simpson said the deceased had signed all the documents and disclosures, but the Office could find no evidence that the provider had explored his personal circumstances or considered how these should inform its recommendation.
“The code requires an adviser to take all these circumstances into account and to properly inform a client as to the options available and why one product is recommended above another,” he said.
The Ombud found that the provider had not demonstrated compliance with the suitability requirements in section 8 of the FAIS General Code of Conduct. The annual report also notes that disclosure and suitability are complementary obligations: providing information about a product does not, on its own, make the advice appropriate for the client.
Simpson cautioned providers against treating disclosure as a tick-box exercise.
“You can follow a tick box approach to make sure, yes, the disclosure was there, the person was told about everything, informed about everything. That’s fine, but that’s only one half of the question,” he said.
“The other question is, in terms of the code, was the consumer properly informed and adequately advised, and are personal circumstances taken into account? If that evidence isn’t there, it’s a problem.”
Actuarial calculations were obtained to estimate what would likely have been available had the adviser recommended a life annuity with a guaranteed term.
The provider accepted the Ombud’s recommendation to settle the complaint on this basis. The complainant accepted R401 877.30.
The client who could not access her annuity capital
The second case, identified as MvM, involved a woman who retired from a provident fund in January 2022 and used her retirement proceeds to purchase a life annuity on her adviser’s recommendation.
When she later tried to access a lump sum, she discovered that the product did not allow withdrawals. She said the restrictions had never been explained and that she had not known she would be unable to access the capital once it was invested.
Simpson said the Office did not find fault with the recommendation to purchase a life annuity or with the product itself. The problem was that there was no evidence the adviser had explained its material restrictions.
“Once you buy this product, you cannot withdraw from it. You cannot sell it. You cannot use it as security in any way whatsoever,” he said.
The annual report records that the Office found no objective evidence that these limitations had been disclosed before, during, or after the sale. Without that information, the client could not make an informed decision about the product and its consequences.
There was no finding of financial loss, and the Ombud did not order the provider to repay the capital. Instead, the provider accepted the Office’s recommendation to pay R50 000 as a goodwill settlement. The complainant accepted the amount.
Simpson said complaints about consumers being unaware of these restrictions were common. Advisers recommending life annuities should therefore make it clear that the capital cannot be withdrawn, sold or used as security, he said.
Advisers should explain the restrictions clearly whenever they recommend the product, he said.
Using information to ask better questions
Simpson also encouraged consumers to do some preparation before meeting a financial adviser. A quick internet search can help someone identify the different annuity options and take a list of questions to the meeting.
He suggested asking an adviser to explain the pros and cons of the different products, and why one would be more suitable than another given the client’s circumstances.
But he was clear that online searches and artificial intelligence should not replace professional advice.
“We definitely do not recommend that consumers do their own internet searches and use AI strictly to guide their financial affairs,” he said.
“Financial advisers registered have ongoing duties to keep up with the industry, to research, to know what they’re doing. They’re professionals.”
He described online information as a tool to help consumers question and understand the advice they receive, rather than a substitute for a registered adviser.
The FAIS Ombud’s Complaints Archive is available on its website.
