FAIS Ombud clarifies remarks about consumers’ trust in their advisers

The FAIS Ombud and the Financial Planning Institute of Southern Africa (FPI) issued statements this week after some financial advisers objected to the Ombud’s remarks about the extent to which consumers should trust their advisers.

The Ombud, Advocate John Simpson, made the remarks during a webinar on 14 August. Leanne Jackson, the Chief Ombud and chief executive of the Ombud Council, and Simpson discussed the recently introduced new Rules for the FAIS Ombud.

Simpson did not have a formal presentation and spoke without notes.

After explaining how his Office handles complaints, Simpson segued into discussing why it is better to avoid complaints from occurring in the first place, and how consumers can do this by conducting their own research and becoming better informed before investing or buying financial products.

Read: Consumers should inform themselves before they transact, says FAIS Ombud

Moneyweb’s report on the webinar drew attention to a few of the statements Simpson made while making his point about why consumers should inform themselves and a play a more active role in their investments.

Its article was headlined “Consumers should not trust their financial advisors ‘absolutely’ – Fais Ombud”, followed by the sub-headline: “Should consider their advice in much the same way they consider the advice of a used car salesman.”

The article starts by quoting Simpson as saying consumers should not trust their financial advisers “absolutely”.

It states: “Simpson admitted this is a strange thing to say but indicated that consumers should consider the advice of their financial service providers (FSPs) or financial advisors in much the same way they consider the advice of a used car salesman when buying a car.”

It quotes Simpson as saying: “You are going to look at the car, you are going to evaluate it, and test drive it. You are not going to trust what the [sales] person tells you. You [consumers] must take the same approach with investment and insurance products.”

The article quotes the Ombud accurately. It also goes to report that Simpson advocates for consumers to be more informed and proactive in their financial decisions, which can provide better protection than regulations alone. Being knowledgeable allows consumers to ask the right questions and prevent issues before they arise, which is preferable to dealing with problems after they occur.

Some financial advisers took Simpson’s remark that consumers should not trust their advisers “absolutely” to mean he was saying that all advisers are dishonest or untrustworthy.

In a statement on Tuesday, the Ombud’s Office said “a recent media report” on the webinar requires clarification and context.

“As highlighted in other media reports, the FAIS Ombud’s Office strongly encourages consumers to do their own research and investigation when being advised on financial products. A great deal of information is available on the internet, which can help consumers understand the basic elements of a financial product and its suitability for their particular circumstances. This approach will assist advisers in providing accurate advice and recommendations and help consumers avoid potential problems at a later stage.

“This approach does not detract from the very important and valuable service provided by financial advisers. The expertise offered by financial advisers and the financial industry as a whole is essential to assisting consumers in navigating the complex financial sphere.”

The Office said most complaints to the FAIS Ombud are settled by FSPs, and determinations are rarely necessary. “The FSPs settle a large portion of the complaints quickly and directly before any investigation is required.”

The Office commended FSPs for their “essential co-operation and support”.

“We publicly reaffirm our support for the financial industry and our commitment to fostering a collaborative relationship with all stakeholders. The Ombud’s role is to ensure fair treatment and protection for all parties, including consumers, advisers, and intermediaries,” the Office said.

 

Trust, but verify

The FPI’s chief executive, Lelané Bezuidenhout, issued a statement yesterday titled “Why you can trust your financial adviser”.

Trusting your financial adviser is essential when it comes to managing your finances; however, this trust should not be automatic, she says.

“Trust is always earned, and not something that is blindly given. As a consumer, you also have a responsibility to verify certain aspects of your adviser’s credentials and standing,” Bezuidenhout says.

“Trusting your financial adviser means believing in their expertise, integrity, and commitment to your financial well-being. It means being confident that they have your best interests at heart and that they are equipped with the knowledge and skills to guide you effectively. However, this trust should be balanced with due diligence on your part.”

Bezuidenhout says consumers should do the following to ensure their adviser is trustworthy and competent:

 

1. Check that the adviser is licensed

Confirm that an adviser is licensed the FSCA. A licensed adviser is authorised to provide financial advice and is subject to the regulatory standards set by the Authority. This can be done by using the search tool on the FSCA’s website.

 

2. Verify competency levels and qualifications

A competent financial adviser should have the necessary qualifications, experience, and training to provide sound financial advice and deliver intermediary services. Ask your financial adviser about his or her qualifications and certifications and the ongoing education he or she undertakes to stay up to date on the latest financial trends and regulations.

“Advisers with globally recognised credentials, such as the CERTIFIED FINANCIAL PLANNER® designation, have undergone rigorous training and adhere to a strict code of ethics,” she says.

 

3. Ensure good standing with regulatory and professional bodies

Being in good standing with regulatory bodies such as the FSCA and professional bodies such as the FPI is a good indicator of an adviser’s integrity and professionalism.

 

4. Ask for references or testimonials

Ask your adviser for references or testimonials from other clients. Speaking to current or past clients can provide valuable insights into the adviser’s performance, reliability, and client satisfaction. “Be cautious of advisers who are unwilling or hesitant to provide references.”

 

5. Absolute trust can be risky

Bezuidenhout says placing absolute trust in an adviser – following his or her advice without question – can be risky.

“Financial advisers, like all professionals, can make mistakes or may not fully understand your unique financial situation. By taking an active role in your financial planning and ensuring that your adviser meets the necessary standards, you protect yourself from potential pitfalls.”

Consumers should remember that, ultimately, their financial future is in their hands.

“While a financial adviser can provide guidance and expertise, it is your responsibility to make informed decisions. This includes asking questions, seeking second opinions when or if necessary, and staying informed about your financial matters.”

Bezuidenhout says consumers who take the above steps can build a strong, collaborative relationship with their adviser – one based on mutual respect and transparency.

“A financial adviser’s commitment to understanding your needs, matching product benefits with your needs, and disclosures of product terms, conditions, and exclusions are good signs of their desire to equip you with you the knowledge to make informed decisions.”

Taking a balanced approach to trust will help consumers to achieve their financial goals with confidence, knowing that their adviser is trustworthy and qualified to guide them, she says.