Don’t get caught out by crafty financial advisors.
How can I verify that the firm and advisor I am dealing with are legitimate?
The Financial Sector Conduct Authority (FSCA) often warns of unscrupulous firms masquerading as legitimate advisory companies with the ill intention of scamming people out of their hard-earned money. Unfortunately, it is not common knowledge that there are steps that one can take to decrease the chance of falling victim to such practices.
The FSCA, which is responsible for market conduct regulation and supervision, is a great resource should you be considering working with a new financial advisor. The FSCA will be able to inform you whether the firm and/or the advisor are authorised to provide financial services or advice. You can call the FSCA toll-free on 0800 110 443 or conduct your own search.
The FSCA further requires that all financial services providers, along with their key individuals and representatives, be registered with the FSCA and comply with ongoing and stringent fit and proper requirements. These requirements relate to specific minimum criteria covering experience, qualifications, regulatory examinations, business class and product-specific training. A financial advisor is required to comply with set continuous professional development (CPD) standards to remain authorised to render services or advice.
There are several professional bodies that advisors may join. These bodies exist to promote professionalism within the financial planning industry by ensuring that their member advisors provide services and advice of a high quality. The Financial Planning Institute of Southern Africa (FPI) is one such institution, and the only institution in South Africa to offer the coveted Certified Financial Planner (CFP®) certification.
The following outlines the requirements to become accredited by the FPI and receive the CFP® designation:
- Obtain a relevant undergraduate qualification in financial planning from an FPI-recognised education provider (refer to the FPI’s website for a list of these),
- Obtain a postgraduate diploma or a BCom Honours in financial planning,
- Write and pass the FPI’s professional competency examination, and meet the relevant work experience requirement of three years,
- A final condition is to abide by the FPI’s Code of Ethics and Practice Standards and renew membership to the institution annually.
If you are dissatisfied with the service received from a financial advisor, the General Code of Conduct for Authorised Financial Services Providers makes provision for recourse.
You are entitled to contact your financial services provider’s registered compliance officer, who should then provide you with a copy of the financial services provider’s complaints handling procedures, and deal with the complaint in terms of said procedures. If not provided to you directly, these procedures are required by regulation to be made available on the service provider’s website.
Part XI of the General Code of Conduct for Authorised Financial Services Providers deals with complaints management and is very specific on how complaints are to be dealt with.
Section 17 (8) (e) stipulates that:
‘A financial services provider must disclose to a client:
- the type of information required from a complainant;
- where, how and to whom a complaint and related information must be submitted;
- expected turnaround times in relation to complaints; and
- any other relevant responsibilities of a complainant.
Furthermore, Section 17 (8) (f) of the code requires that:
‘A provider must within a reasonable time after receipt of a complaint acknowledge receipt thereof and promptly inform a complainant of the process to be followed in handling the complaint, including:
- contact details of the person or department that will be handling the complaint;
- indicative and, where applicable, prescribed timelines for addressing the complaint;
- details of the internal complaints escalation and review process if the complainant is not satisfied with the outcome of a complaint;
- details of escalation of complaints to the office of a relevant ombud and any applicable timeline; and
- details of the duties of the provider and rights of the complainant as set out in the rules applicable to the relevant ombud.
Contact details of the Office of the Ombud for Financial Services Providers (FAIS Ombud) are available here.