Background

1. On 25 October 202 the Complainant and her now late husband approached the Respondent for advice regarding the deceased’s imminent pension.
2. The Respondents’ representative recommended a life annuity, without asking any questions and without any further explanation.
3. Two years after the life annuity was incepted, the Complainant’s husband and life assured passed away, and the Complainant was informed that due to the nature of the life annuity, the funds would be ‘forfeited’ and there would be no further income payments.
4. The Complainant states that her husband wanted the full proceeds of his retirement benefit but was forced into purchasing an annuity, and that he did not understand the terms of the product and did not make an informed decision.
5. The Complainant further stated that her husband was ill when the annuity was purchased and forced to retire earlier than he had initially planned. Accordingly, he would never have elected the annuity he signed up for, given his health at the time; had he been aware of the risk that the annuity payments would cease upon death, he would not have signed for it.
6. The Complainant is unemployed and was fully dependent on her late husband and seeks assistance from this Office so that the remaining value of the annuity is paid out to her.
7. The Respondent maintained that all material disclosures were made at the point of sale, and the client was informed that no payments would be due to beneficiaries upon the client’s death.
8. The Respondent argued that the client made an informed decision and that the financial planner could not have foreseen the untimely death of the client; both solutions were provided to the client, and he chose the best option that suited his needs at the time.
9. Subsequently this Office issued a notice under Section 27(4) of the FAIS Act, advising that the complaint warranted investigation.
10. The Respondent responded by reiterating its position, however it did offer a goodwill payment of R250,000.00 in full and final settlement. This offer was rejected by the Complainant.

Assessment of Evidence

11. This Office found that the advice provided by the Respondent did not align with the client’s actual circumstances, including the presence of a financially dependent spouse and minor children. The advice process was deemed unsuitable, as it failed to consider the client’s full personal and financial circumstances.
12. Disclosure alone was found insufficient to cure the deficiencies in the advice.
13. In this regard, this Office referenced the following sections of the General Code of Conduct for Authorised Financial Services Providers and Representatives (“the Code”).
14. Section 2 of the FAIS General Code of Conduct (“the Code”) outlines the general duty to act in the client’s best interests, requiring FSPs to act honestly, fairly, with skill, care, and diligence, and to consider the integrity of the financial services industry.
15. Section 8 (1) (a) of the Code states that prior to providing a client with advice, a Financial Services Provider (“FSP”) must obtain information regarding the client’s needs and objectives, financial situation, risk profile and financial product knowledge and experience as is necessary for the provider to provide the client with appropriate advice.
16. Section 7(1)(a) of the Code requires that, prior to the conclusion of any transaction, a provider must disclose all relevant and material information that would enable the client to make an informed decision. This includes the material terms and conditions, product restrictions, and any risks associated with the recommended financial product.

Outcome

17. This Office requested that the respondent provide an actuarial calculation illustrating the net capital value payable to beneficiaries under different scenarios. The most accurate scenario indicated a benefit of R401,877.30 under a life annuity with a 10-year guaranteed term.
18. Therefore, this Office recommended that the settlement amount be aligned to the actuarial value of R401,877.30, as this represented the minimum position the Complainant would have been in had suitable advice been rendered.
19. The Respondent accepted the recommendation and provided a settlement offer that was signed by the complainant in acceptance thereof.