Quite often, people in the industry question the need for regulation. They look at the issue from their own perspective, and the fact that their clients have never complained about them.
Unfortunately, it is not about the individual advisor, in the bigger scheme of things. There are still individuals and organisations providing services with their own profit as the sole motive for the advice and service they give.
The latest determination by the FAIS Ombud, against Fugio Financial Services, seems to support this statement.
Two clients who work in Dubai requested their South African based financial advisor, an old friend of theirs, to handle investments for them. In brief, the client thought that he made a single premium investment of R1.2 million in a five year endowment. It turned out that the actual contract was a ten year endowment with a recurring annual premium of R1.2 million.
The Ombud points out that it is highly unlikely that a construction worker, who is not permanently employed, would ever agree to such an investment. The only motivation for this, from the advisor’s perspective, could be the commission involved.
This is likely to make big waves in the media, and rightly so. Unfortunately for the industry, and for the honest individual advisor, transgressions like this, even if committed by a small minority, will keep on tarnishing our image, and strengthen the case for more regulation, rather than less.
Please click here to read the full determination.