Treating Customers Fairly – another toothless dog?

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Treating Customers Fairly?

You’ve probably been hearing a lot of this in the news, and no doubt more is to come. Is it going to be another toothless dog in the FSB’s arsenal or might it actually have a positive impact on the man in the street?
At the risk of boring you ( but bear with me, some of that small print could be VERY interesting), these are the basic tenants:

 

  • Customers can be confident they are dealing with firms where TCF is central to the corporate culture
  • Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
  • Customers are provided with clear information and kept appropriately informed before, during and after point of sale
  • Where advice is given, it is suitable and takes account of customer circumstances
  • Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect
  • Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.

(Source FSB https://www.fsb.co.za/feedback/Pages/tcfhome.aspx)

If you want to read the whole thing, I have uploaded a copy on my website HERE.

I think you’ll all agree with me that this is act is way overdue, and potentially could see a massive overhaul of the financial services industry. It is just sad that one has to legislate for it.

 
The one sentence that really interests me is “Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.”
Mmmm… I wonder how that is going to play out with the insurance companies that charge penalties on RAs or Endowments that haven’t matured and that they happily charge penalties of 30% or more on the full market value? The ‘golden handcuffs’ that some providers use, whereby you will lose bonuses if you leave/claim are unlikely (IMHO) to be considered as ‘unreasonable’. Buyer beware I guess.

This insidious practice of massive penalties on OLD, I mean really OLD, investments  has always worried and infuriated me (to say nothing of 50 year terms for endowments that will mature when the client is in their 80’s), and as a result I try to use LISP investments exclusively (only being forced onto insurance platforms by the high minimums, 3 times). In many ways I guess I can afford to be indignant, having joined the industry in 2007, but I keep coming across old retirement annuities (pre 2007) that have these hefty penalties for switching to another platform – even if that platform is owned by the same company! Putting a 30% hole in someone’s investment is just not viable, and as an advisor I am stuck trying to find a reasonable unit trust from a proprietary and truncated list the provider offers. I know this attitude is unpopular with some of my peers and providers, but I am hoping the advent of this act will result in the FSB putting a sunset clause on the penalties that they had a stab at back in 2007 – after Carte Blanche whipped up the outrage at the 100% penalties.
Another place where this act has the potential to make thingsdifficult for (Life) providers, in my opinion, is the disability arena. There are still far too many subjective measures used to determine ‘disability’. The fairness of expecting clients to undergo rehabilitation, surgery or retraining in order to ‘fix’ them is likely to be tested under this new law (and has, successfully, behind the scenes even before it’s enactment).
Author Dawn Ridler  

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