Proper financial advice is crucial for consumers

By Staff Writer

 

Direct marketing by product providers has become a challenge for financial intermediaries in the distribution of financial products. Because financial products need to be accompanied by appropriate advice, the recent phenomenon has become a concern to intermediaries and consumers.
 
This is according to Brian van Flymen, president of the Financial Intermediaries Association of Southern Africa (FIA). Van Flymen added that consumers are best served by skilled financial advisors with intimate product knowledge. “It is extremely difficult, if not impossible, for a call centre operator to communicate the workings of a complex financial product to consumers,” says Van Flymen. 
 
Whose advice can you trust?
 
According to Sasfin financial consultant, Gavin Came, one of the main limitations of a financial intermediary contracted to one product provider, is that he/she can only give advice on the product of the financial institute they are affiliated to. An independent intermediary has the freedom to offer advice on a variety of products.
 
“This doesn’t mean that contracted financial intermediaries will give you bad advice. The Financial Advisory and Intermediary Services (FAIS) Act stipulates that the consumer must get accurate advice from a contracted or independent financial intermediary. An independent advisor is able to give you advice on more than one product,” says Came.
 
Customer service is a joint effort
 
Jonathan Dixon, deputy director of insurance at the Financial Services Board (FSB), emphasized the importance of independent advice as a key element of consumer protection. “A key element of adequate consumer protection is the value of good advice, and the FSB places a high value on independent advice to customers. One of the criticisms of the Financial Advisory and Intermediary Services (FAIS) regime has been that it created a perception that the responsibility for the delivery of fair outcomes rests solely on the shoulders of the intermediary. With Treating Customers Fairly (TCF) we are making it clear that delivery is a joint effort between product provider and the intermediary,” says Dixon.
 
Van Flymen added that the FIA will build on the successes it has achieved over the past five years by keeping a close watch on industry developments and taking cognisance of challenges that will affect members.
 
“Above all, we strive to remain the dominant player in the financial product distribution channel. It is thus crucial for intermediaries to support pro-consumer initiatives by increasing their knowledge and providing sound advice whenever called upon,” states Van Flymen.
 
Don’t take products at face value:
 
Came warned that when consumers purchase a product directly marketed by a company, they are not protected by the FAIS Act.
 
“Consumers who are ‘advised’ on a product through advertising are often misled. An example would be buying more than one funeral cover which may not be appropriate for your needs,” said Came.
 
It is therefore important to speak to an independent financial intermediary or advisor to ensure you choose a product that suits your specific needs.

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