Background:

1.) The complaint concerned financial advice provided by the Respondent in 2015 in respect of a voluntary term annuity. The Complainant, who had retired from employment, wanted to invest R400,000.00. These funds were part of her one-third pension fund commutation of approximately R1.3 million. The Complainant explained that, after using a portion of her proceeds to renovate her home, she reserved the R400,000.00 to provide for an income during retirement.

2.) The Complainant submitted that she believed she was purchasing a guaranteed, low-risk investment that would provide her with a monthly income throughout her retirement. However, in January 2026, she learned that only R21234.27 remained of the original R400,000 invested.

3.) The Complainant submitted that the Respondent had failed to comply with its obligations under the Financial Advisory and Intermediary Services Act 37 of 2002 (“the FAIS Act”) and the General Code of Conduct for Authorised Financial Services Providers and Representatives (“the Code”) by failing to conduct an adequate needs analysis and, as a result, recommended a product unsuitable for her financial objectives and risk profile. In addition, the Complainant stated that the Respondent had failed to explain the investment structure, risks, fees, maturity terms and automatic reinvestment provisions in a manner that enabled her to make an informed decision.

4.) The Complainant also raised concerns surrounding the automatic reinvestments made in 2020 and 2025 that saw the investment extended for a further five years each time, as she never received the maturity notifications issued.

5.) The Respondent denied that it acted in breach of the FAIS Act or the Code, and stated that all policy documentation, including the investment structure, terms and conditions, fees and charges, was provided to the Complainant at inception.

6.) The Respondent also provided proof that annual anniversary statements and maturity notifications were sent throughout the investment period, including notices dated 23 May 2020 and 23 May 2025, advising the Complainant that the investment was approaching maturity and inviting her to review her investment objectives, and as no instructions were received from the Complainant, the investment automatically reinvested in accordance with the policy terms.

7.) The Respondent also tried to justify the investment by stating that although substantial withdrawals were made from the investment over time, the investment nevertheless generated overall growth of approximately R49,355.88, meaning that no capital loss was suffered, and the advice rendered was suitable for the Complainant’s circumstances at the time and complied with the applicable regulatory requirements

8.) Despite the Respondent’s response, it was unable to retrieve its complete compliance records relating to the financial service rendered in 2025, detailing the advice provided that saw this recommendation appropriate to the Complainant’s needs and circumstances.

Assessment of Evidence:

9.) The principal issue was whether the Respondent could demonstrate that the financial advice rendered in 2015 complied with the FAIS Act and the Code.

10.) The Respondent was, however, unable to furnish this Office with the complete advice records ordinarily expected to demonstrate compliance with the Code, including, but not limited to a comprehensive Record of Advice, the needs analysis conducted prior to the recommendation, documentation evidencing the Complainant’s financial objectives, risk profile and investment experience.

11.) There was also insufficient evidence demonstrating that the material features of the investment, including its risks, fees, restrictions, liquidity and reinvestment provisions, were adequately explained, and records demonstrating that the Complainant was placed in a position to make an informed decision.

12.) As a result of this, the Respondent was unable to demonstrate compliance with Section 8(1) of the Code which requires that a financial services provider take reasonable steps to seek from the client appropriate and available information regarding the client’s financial situation, financial product experience and objectives to enable the provider to provide the client with appropriate advice and identify the financial product or products that will be appropriate to the client’s risk profile and financial needs.

13.) The Complainant’s circumstances were material to the advice process. She was approximately 66 years old, had recently retired and had specifically reserved R400,000.00 of her retirement proceeds to provide income during retirement. These circumstances required proper consideration of her financial needs, investment objectives, liquidity requirements and tolerance for investment risk as required in terms of Section 8(1) of the Code.

14.) The Respondent was also unable to show that it had complied with Section 7 (1)(a) of the Code, which states a financial services provider must provide a reasonable and appropriate general explanation of the nature and material terms of the relevant contract or transaction to a client, and generally make full and frank disclosure of any information that would reasonably be expected to enable the client to make an informed decision

Outcome:

15.) The Office issued a notice in terms of Section 27(4) of the Financial Advisory and Intermediary Services Act, inviting the Respondent to reconsider its position in light of the absence of the original compliance records and the concerns regarding the suitability of advice and the disclosures made.

16.) Following reconsideration, the Respondent made a settlement offer of R172,621.43, based on a reconstructed calculation using applicable money-market rates and considering the income and withdrawals received by the Complainant.

17.) The Complainant accepted the offer, and arrangements were made for payment into her nominated Bank account. The complaint was accordingly resolved by settlement without the need for a formal determination.

18.) This is an important reminder to consumers to understand the risks, costs, liquidity and guarantees associated with an investment before committing retirement capital, and to financial services providers that appropriate advice must not only be provided but must also be adequately documented so that compliance can be demonstrated if the advice is subsequently challenged.