Tag Archives: FSB

The great South African funeral cover rip-off!

Can someone explain to me why funeral insurance is so expensive? It has got to be one of the biggest rip-offs and forms of institutionalised abuse of South Africans. I did some shopping around online and could find the following quotes for R20000 funeral cover:

Simply – R81pm (but you also have to buy other forms of cover so the minimum premium is closer to R150 pm and includes R50k life cover). Hollard – R104pm, Dotsure – R73pm, Burial Assist – R100, Budget – R102, First for Women – R104, 1lifedirect – R123

Now compare the cost of a funeral policy to a properly underwritten life policy. Using the same information that I used to get the funeral policy quotes, I was able to get a quote for R300000 life cover (which includes funeral cover pay-out of R40k) for under R100pm.

It is clearly very lucrative cover as there are at least 30 providers in SA that I could find…and the vast majority of South Africans are being seriously ripped off by the funeral insurance industry – it is time that the Financial Services Board looked into this…

Financial planning profession in SA – not yet, not even close!

For far too long now we have been talking about financial planning becoming a profession in SA…sadly, we are not even close yet because it still remains an industry dominated by the need to sell products and by the suppliers of those products.

Consider the following:  a medical professional (doctor) requests information (a report) from another medical professional about a patient. It is supplied – there is no need to send a letter of consent or something similar justifying why the doctor requesting the information is entitled to it – it is implicit in the profession that the requester is entitled to the information and it is given! Not so in the financial planning profession…if we are not the “broker on record”, it is implicit in our “profession” that we are not entitled to the information and that when we request it we are therefore trying to obtain it illegally.

Or imagine going to see a new doctor/dentist/lawyer/accountant for the first time and before you get going they pull out a multi-page document that they need to take you through to first explain to you why they can be your doctor/dentist/lawyer/accountant. It’s insane – their ability to act is implicit in their title which is a function of their qualification. Not so in the financial planning “profession” – we have to take clients through a disclosure document – who made this stuff up?

I am tired of the talk of a profession and tired of being treated with suspicion by every single insurance company when I request client information. I am tired of being treated like a criminal trying to obtain information illegally. I am a professional and it should be implicit that any information I request is done so with all the necessary “permissions” in order.

Who are you, Liberty, Sanlam, Old Mutual, Momentum, Discovery et al to decide that I am not entitled to information? Or that the letter of consent supplied is out of date or that you won’t act on the letter of consent and will only send the information directly to the client? Who are you to decide that despite the fact that I submitted the death claim that you will not tell me how much was paid or when it was paid because I am not the “broker on record”? Who are you to reject a General power of attorney just because you don’t like it?

Imagine if a pharmaceutical company refused to service a doctor because he or she did not move enough of its drugs in any given year? You are a bunch of dinosaurs and it is time to change your model – you are ripe for disruption! The sales model is obsolete and in complete contradiction with a financial planning profession.

Or consider the following:

If I set up a service that provides factual advice only and clients pay me directly – no products are sold nor intermediary service provided then I seem to fall outside of the scope of the FAIS Act. Or if I just do a financial plan for a client (which contains factual advice only) then I also appear to fall outside of FAIS…FAIS only applies where there is advice related to product and/or intermediary service…How is it possible that we have significant legislation such as the FAIS Act and it does not cover the very profession we are seeking to establish – it seems to only apply when there is a product involved?

Yes, I am having a rant but it is time that the Financial Planning Institute stood up for its professional members and stopped protecting the interests of the financial service providers first! It is time that the FPI insisted that for its corporate members, that when they deal with a CFP® then there is no need to treat them with suspicion – information requested should be supplied directly to the CFP® without delay!

It is also time that the FSB made a ruling that anyone who wants to do financial planning needs to be a Certified Financial Planner®*. Imagine if you could practice as a doctor/dentist/lawyer etc with a matric only? The industry only has its self to blame for the suspicion with which we are treated by the public at large. It is time to stop selling products and time to start doing financial planning first and properly. Products, if needed, only come at the very end of the process.

*yes I know that there are some very good people out there who have been in the industry for many many years who are not CFP’s – this criteria should be a minimum requirement for any new entrants!

Suck-session Planning

I recently tried to make an appointment to see my doctor for my annual check-up only to be informed that he has left to “take a sabbatical”. Bottom line is that he is tired and has had enough and is going to do something else.

I’m disappointed, but I guess I’ll just find another doctor. It will take a bit of time, I’ll ask around for some recommendations and will probably go and see one or two before making my choice. Just the same as I would do if my accountant, dentist, lawyer or any other professional retired/died/left the business. That’s the way it works…

So, what’s the FSB’s obsession with succession planning in the financial services industry? Why the need for a succession plan (as part of legislation)* which just adds to the cost of running a business and ultimately increases the cost of advice to clients?

If I leave/retire/die my clients can find a new financial planner. There is no financial risk to the clients and they won’t lose any money – they’ll just need to find another financial planner. That’s the way it works in any profession, except ours…but I guess we’re not yet a profession as much as we like to pretend that selling products is financial planning.

 

*a succession plan is good business practice, but to force it as part of legislation seems crazy to me.

 

At Liberty to do what they like?

It seems that Liberty Life have decided that they can do what they like and ignore written instructions from their clients. They appear to have adopted a policy of sending policy information requested by a non-servicing advisor, on behalf of a client and with the client’s written consent, to the client and not to the advisor who requests it.

This is NOT what the client has requested? How can they get away with this?

It also makes the work of the financial planner so much more difficult to do (and adds to the cost of servicing the client). I’m prepared to venture that this is not in the spirit of TCF!
If Liberty are worried about advisors obtaining information fraudulently then perhaps they need to look at the quality of the average advisor with whom they are doing business and not upset their existing client base either.
Rather than retaining the business, this kind of attitude goes a long way in encouraging clients and advisors to move business away from Liberty Life.

 

 

 

You should be ashamed of yourselves, Liberty Life

I just came across a client who has been sold a decreasing life annuity by someone representing Liberty Life. Yes, I know that there is no such thing (officially) as a decreasing life annuity (no one would buy it if there was) but this is effectively what a non-escalating life annuity is. You have condemned the client to future poverty!

While the initial income may look more attractive, in 20 years time (the guarantee period on the annuity for a 65 year old with stage 3 cancer and no financial dependents?) she will be getting an income which will be less than 1/2 of what she should be getting if there was an inflation linked escalation.

This is the kind of product and advice that gives our industry a bad name. If the insurance companies and ASISA wont act then perhaps it is time that the regulators banned this kind of product.

Imagine this…

Imagine that the body that regulates medical doctors (or any other profession) went to the doctors and said something like this to them: “We are terribly sorry but (due to a whole lot of reasons) we have let a whole lot of people who have not been suitably qualified as doctors, practice as doctors. And now as a result of this we need all of you to write (more) exams so that we can try to ensure at least some minimum kind of compliance.”

Unthinkable in just about any professional arena – the regulating body would be hung out to dry!

Not so in the Financial Services profession…exactly because of the above we now all need to write exams before the end of the year. So if your financial planner is grumpy (and I know I am) you now know why!

Leaky taps!

It’s a good job I don’t earn a living from writing…it would have been a very bad month and a number of people have reminded me that I have not updated the blog for a while. I guess it is nice to be “missed” but as I have explained to many of them, I usually write when I feel passionately about something…

So does that mean that I’m not passionate at the moment? Not at all, on the contrary…I just don’t know that the things that are “consuming” me would really be of interest to most other people…if you think you might be interested then read on, else come back next week again.

Fact is that right now, most Financial Planners/advisors/brokers are coming to terms with the fact that we all have to right exams this year. And not just any exams, a closed book multiple choice exam with a pass mark of 65% that is based on the letter of the law (stuff that any normal professional in any other occupation would look-up as and when he/she needed the information). Imagine telling a doctor/lawyer that he/she has to write a whole lot of exams because their regulators have allowed a whole lot of under-qualified people to pass themselves off as doctors/lawyers?

The exams are not really the issue though; it is the real intention behind them that appears to be “questionable”. The nature of many the questions is such that it appears that the intention is to “trick” and not assess knowledge. Some of the answers revolve around making a distinction between the use of words. For example:

  • “The registrar must…” or
  • “The registrar may…” or
  • “The registrar might…”

Come on! What is it that is the regulators are actually trying to achieve? Estimates are that as many as 2/3 of financial advisors/brokers (maybe more) will be forced to leave the industry by the end of the year. The future will most certainly contain far fewer independent financial planners and financial planning practices with bigger (corporate) offerings (just look at how many of the corporates are currently buying up books). These are not usually the kind of places associated with personal advice, attention to detail or a focus on relationship. I could harp on about the process and the intentions as well as the likely unintended consequences for the industry and also the consumer but it won’t get us anywhere…

My biggest issue with FAIS, all the legislation and these upcoming exams is that as well intentioned as the legislation may be, it is analogous to putting a bucket under a leaky tap…you need to fix the tap!

We need effective regulators and we need to regulate the financial services companies far more pro-actively. There have been far too many financial scandals on the FSB’s watch and far too many of the companies have been offering inappropriate products for far too long. Yet the responsibility and blame is usually passed on to the financial advisors. Just one example of this is the new conflicts of interest legislation which prevents financial institutions from spending more than R1000 per year on an individual advisor. Clearly the intention is to try to stop companies enticing brokers to sell their products by wining and dining them (this does not apply to their internal salespeople).

However, one of the biggest conflicts (in my opinion) has not been addressed.  This is the area around retirement annuities – to my mind there is a massive conflict of interest where companies offer life insurance (contractual) RA’s as well as unit trust RA’s. There is a complete conflict with respect to the quantum of commission that can be earned on these 2 RA’s – for the target chasing sales person, the contractual RA wins every time and the consumer ends up with an out-dated and inappropriate product. Did the legislation even consider this as a conflict?

So right now, despite the fact that we run a great business and have an awesome client base and are able to impact a significant number of lives for the better, the future of our industry is highly uncertain…and I’m grumpy about that!

I hear that land is cheap in Zim and I am considering the appeal of farming (not really, but there are times when it does look attractive compared to this)!