Background:
1.) The Complainant filed a complaint with the Office of the FAIS Ombud on 16 January 2025 regarding the financial advice provided and the implementation of her late husband’s life annuity policy.

2.) In the complaint, the complainant cited two respondents. The 1st Respondent was the independent intermediary for the financial service and advice provided to the Complainant’s late husband, the policyholder.

3.) The 2nd Respondent was the product provider for the service, and the lack of disclosure provided when the life annuity was amended.

4.) The Complainant’s late husband invested R1,300,000 into a life annuity with the 2nd Respondent on 26 March 2021, as advised by a representative of the 1st Respondent.

5.) While the annuity provided guaranteed income and a life cover benefit, upon the insured’s passing, only R250,924.95 of the life cover was paid out when the policyholder passed away. The Complainant was of the view that the product did not align with what was discussed and recorded in the Record of Advice, that no proper needs analysis was conducted, and that she had been financially prejudiced due to the reduction of the life cover.

6.) The Complainant requested that the 1st Respondent implement the annuity as initially recommended and compensate her for the financial prejudice caused by its negligence.

7.) In response, the 1st Respondent submitted that the deceased had purchased the annuity and life cover in January 2021 after having been provided with the relevant proposals. He had signed the required documents, including the Minutes of the Meeting, Record of Advice, and Application Form.

8.) The Respondent was of the view that these documents confirmed the deceased’s intention to purchase a life annuity of R1,300,000, to withdraw a tax-free lump-sum of R400,000, and to keep his wife, the Complainant, as the sole beneficiary.

9.) The 1st Respondent insisted that the deceased had subsequently reduced the life cover independently to lower his monthly premiums from R2,434.95 to R509.57 without seeking additional advice, and it denied any misrepresentation or failure to comply with their obligations.

10.) The 2nd Respondent responded that it had made the deceased aware of the consequences of reducing the life cover benefits; however, it also confirmed that it could not respond to the financial service rendered or the advice provided, as it had been provided by an intermediary that was independently registered with the FSCA.

Assessment of Evidence
11.) The Ombud noted that the deceased was not provided advice in a timely manner, as the Record of Advice was signed after the policy quotation was signed.

12.) In addition, the Ombud also found inconsistencies in the records and advice provided by the 1st Respondent. The Record of Advice noted that the deceased had initially opted for an escalating annuity with a 10-year guaranteed period, but no such guaranteed period was reflected in the signed policy.

13.) Therefore, the policy enacted did not align with the advice rendered, which was deemed incorrect, misleading and not in line with Section 3(1)(a) (i-iv), which requires financial service providers to ensure that representations and information provided to clients are factually correct, clear, and not misleading. It also mandates that advice must be adequate, appropriate, and provided in a timely manner, allowing clients to make informed decisions.

14.) In respect of the decrease in the life cover benefit, it was found that the deceased had exercised his discretion as a policyholder to reduce the premium; and that he had been advised by the 2nd Respondent on the effect of the decrease in premium from R2,434.95 to R494.57, i.e. that it would reduce the benefit to R260,000.

15.) This interaction between the deceased and the 2nd respondent satisfied the requirements of Section 3(1)(a) (i-iv) of the General Code of Conduct as well as Section 3(1)(d) which states that when a provider renders a financial service, the service must be rendered in accordance with the contractual relationship and reasonable requests or instructions of the client.

Outcome
16.) Based on the outcome of the investigation, the 1st Respondent offered the Complainant a goodwill payment of R250,000.

17.) The Complainant rejected the offer to allow the Office to provide guidance on what is a just and equitable quantification for the damages suffered due to the Respondent’s non-compliance with Section 3(1)(a) (i-iv) of the General Code of Conduct.

18.) The 1st Respondent was requested to provide a revised offer based on an actuarial calculation, which would include a 5% per annum escalation on the remaining payments that would have been payable had a 10-year guaranteed term been in place.

19.) This led to an increased offer of R 613 088, which the Complainant accepted.