Due to the recent poor performance of living annuities, many investors believe that they received bad advice and now want to cash in the investment. This comes down to a question of good or bad advice which is a FAIS (Financial Advisory and Intermediary Services Act) issue.

If you are unhappy with your investment you need to firstly contact your adviser and request a meeting. Your adviser is obliged to meet with you at least once a year to revise your investment and its objectives. At this meeting you can ask questions and understand why your product is not delivering on its objectives. A reader recently had his issues resolved by the company simply through a meeting and a proper explanation of the investment and its objectives. Open lines of communication are key.

If you are unhappy with the response, you can then raise the issue with the company’s compliance officer or complaints centre. If you are still unhappy and believe you did indeed receive bad advice, you can raise the complaint with the FAIS Ombud.

Before you do this, though, you need to understand whether the adviser did actually follow due process, and it’s just poor market performance that is causing your unhappiness, or if you really were given bad advice or invested in a product that was not explained to you. This information would be contained in the record of advice.

Record of advice

Independent financial planner and director at the Financial Planning Institute of SA (FPI), Wouter Fourie CFP® of Ascor, says that a provider must maintain a record of advice furnished to the client and provide this information when requested. “These records must reflect the basis on which the advice was given,” says Fourie. This would include a summary of the information and material on which the advice was based, as well as the financial products which were considered.

They must also state why specific products were selected and how they meet the client’s needs and objectives. It should also contain information on all fees and costs.

In the case where the adviser is recommending a client to switch to a different product, a comparison of fees between the terminated product and the replacement product must be provided. This should include charges, special terms and conditions, exclusions of liabilities, waiting periods, loadings, penalties, excess, restrictions, exclusions or circumstances in which benefits will not be provided. Fourie says it must also explain why the replacement product is more suitable to the client’s needs than retaining or modifying the existing product. “A provider must provide the client with a copy of the record contemplated in writing,” says Fourie.

If the FAIS Ombud finds that the adviser did not follow due process or provided bad investment advice, then there could be a penalty awarded. However, you cannot reverse an investment in a life policy such as a living annuity or life annuity. If you are unhappy with your investment you can move to another financial adviser, change the portfolio of the underlying investment or switch to a guaranteed annuity.

Contact details for Ombud for Financial Services Providers:  www.faisombud.co.za or 012 470 9080

This article first appeared in City Press.