Be very, very careful when you allow your financial affairs to be conducted by an independent financial adviser. The onus is on you to ensure that he or she is properly qualified to look after your money.
There are many well-qualified people out there, particularly those who are certified financial advisers, licensed by the Financial Planning Institute (go to www.fpi.co.za to find one near you). But there are also bums out there, and the bums are indirectly protected by the financial services industry, particularly the life assurance companies, which also provide them with perverse incentives, such as luxurious trips abroad, to (mis) sell products.
By year-end, the Financial Advisory and Intermediary Services Act will give you better protection from the unqualified cowboys, but don't believe that by merely buying the product of a particular company you are in safe hands. You are not.
Although the life assurance industry is legally correct in saying it is not responsible for any mis-selling or wealth-destroying advice that unqualified independent advisers give, the industry is, in my view, morally responsible. Life assurance companies allow unqualified advisers to sell their products.
Deal with an agent
The life assurance companies take responsibility for their agents (people who are employed by them), but not for independent advisers, who also sell their products. So, if you cannot find a qualified independent financial adviser, deal with an agent, as you will have better comeback.
What is even worse is that the good and qualified independent advisers have their reputations unfairly sullied when the life industry fails to weed out the rotters.
Recently Personal Finance has received numerous complaints from readers about advice they have been given. In each case where an independent financial adviser has been involved, the companies refuse to accept liability, saying that the legal relationship is between you and your adviser.
Life assurers are the custodians of our savings and we need to know that they behave with due prudency when it comes to managing our savings and who they allow to give us advice and sell us their products.
The most unfortunate part of all this is that everyone needs life assurance products and the vast majority of the sales made have been of enormous benefit to ordinary people, and most particularly their dependants. Unethical behaviour will only stop people from using the products that are absolutely essential to ensure financial well-being.
A blow to public confidence
Public confidence in the life industry is further undermined by the unwise way in which policyholders' money was managed at Fedsure.
Incidentally, I requested an interview with Arnold Basserabie, the former chief executive of Fedsure, who must ultimately take responsibility for the poor management of policyholder money at Fedsure.
Basserabie's lawyers turned down the request on his behalf, while taking exception to some of the statements in Personal Finance reports last week, including the fact, to quote Basserabie's lawyer Hymie Levin, that "you wrongly refer in that article to the 'virtual collapse' of Fedsure, whereas in fact the purchase consideration received from Investec for the major components of Fedsure exceeded R4 billion!"
I suggest to both Messrs Levin and Basserabie that they listen to the Monty Python classic about the dead parrot. For all intents and purposes Fedsure Life is a dead parrot, it is no longer here, it has departed, it is deceased, it has gone to that place in the sky.
Technically, Fedsure may still have been nailed to its perch when Investec paid R4 billion (substantially down on the more than R5 billion first agreed) to rescue Fedsure. By that stage, Fedsure would have been lucky, after what it did to policyholder value and the manner in which it was treating disgruntled investors, to have signed up more policyholders.
The capital backing policy liabilities was collapsing and required a significant injection of shareholders' money even before Investec came to the rescue ... and all this was before the current market collapse.
Personal Finance will continue to refer to the virtual collapse and demise of Fedsure. Like the parrot, Fedsure will never return, although it will continue to haunt many people who entrusted it with their savings.