You have recourse for bad advice….

The FAIS Act was enacted on the 30th September 2004 and from this date onwards all advice is regulated to protect the consumer and the advisor for that matter.

Protection for the consumer

Advice must be qualified and appropriate.
Full disclosure and transparency must be provided throughout the process.
A needs analysis should be conducted in every instance unless the client specifically agrees to single product advice.
If the advice provided does not meet the expectations in that it causes financial loss to the client then there is recourse to complain to the ombudsman which has jurisdiction over the advice, product or service.
There are different ombudsmen for different products and services and you need to find the right one:

FAIS Ombudsman –

Since 1 April 2005, the FAIS Ombud was granted the authority to act as Statutory Ombud under the Financial Services Ombud Schemes Act, 37 of 2004 (‘FSOS Act’). This means that the Ombud can deal with complaints against financial institutions, which do not fall within the jurisdiction of any other ombud scheme or where there is uncertainty over jurisdiction. The FAIS Ombudsman is like the wicketkeeper of the industry. If the ball slips past other jurisdictions he is there to catch it.
FAIS ombudsman deals with complaints not exceeding R800 000. If in this is exceeded then you will have to legally pursue the case on your own.

Ombudsman for long term assurance – Life assurance products and services

Our office provides an independent, objective, efficient and free service to policyholders and others in respect of their complaints arising form long-term insurance policies.

Pension Funds Adjudicator – Pension related products and services, including retirement annuities.

The mandate of the OPFA is to ensure a procedurally fair, economical and expeditious resolution of complaints in terms of the ACT,

Short term Ombudsman

Ombudsman for banking services (funded by the banks) –

The process for complaining:

Get everything in writing
The proposal and documentation leading to the advice
Contact the advisor firstly and get him to respond to your concerns
Contact the company represented by the advisor allowing for 30 days to respond
Then contact the relevant ombudsman detailing the complaint as much as possible

Prevention is better in than cure. So take the time to carefully understand the advice and the recommendations provided.
Products can be technical and need explanations.
A competent financial advisor will understand this and should ensure that the solution provided is appropriate for your circumstances.

Are your covered for a severe illness?

Assurance covers you for just in case, providing you with capital to cover the financial loss you may experience as a result of the life changing event.
It’s expensive if nothing happens, but is probably the best financial decision that you make should something like a having a severe illness occur.
Assurance provides a capital or income when you do not have it. As you improve your financial well being by creating your own capital wealth then your dependency on life assurance should lessen.

Severe Illness

Heart attack, stroke, cancer, coronary arterial bypass systems are the four main and most common severe illnesses you are likely to contract. image
The assurance covers you for a capital sum which is determined by the severity of event. If you have a mild heart attack your payout will be a smaller percentage of the capital sum assured than a major heart attack which will pay out 100% of the benefit.
Dreaded disease cover fits into your assurance portfolio between your medical aid which cover the costs in hospital and to some extent costs for recovery and disability cover which covers you when you cannot work and earn an income. Disability cover will take into account high interest liabilities which translate into high monthly costs if you cannot work.

Medical aid covers medical costs
Disability covers loss of income
Severe illness covers costs consider the costs of:

recuperation – it may take a while to get back to work and in the interim bills need to be paid. Your disability cover normally has a waiting period before paying out so the the payout from your servers illness will take up this gap.

Some severe illnesses can leave incapacitated resulting in costs in modifications to your new lifestyle . If you end up in a wheel chair, for example, you will need modifications done to your home and perhaps your motor vehicle.

Get the right balance

Seek advice from advisor to find the appropriate cover for you. Understand the definitions and what you are actually covered for.

There is an overlap of cover between medical aid and disability cover so don’t over insure. Assurance is there to replace financial loss and is expensive is you never claim. So your cover should be adequate. If you get it right your medical aid, severe illness and disability cover should provide you with enough funds to maintain your lifestyle through any life changeling event.

Seek advice from a qualified financial advisor to find the appropriate cover for you. Understand the definitions and mechanics of how the claims work. Especially around the severity levels. It’s a technical assurance which needs to be understood.

Q and A……

1) What is dreaded disease cover?
It is assurance which covers you for a severe illness related to major organs or systems such as heart attack, kidney failure, liver disfunction, cancer

2) Why should a person consider buying this type of cover?
A dreaded disease can have a serious impact on your financial security. The assurance provides a lump sum to cover costs associated with a severe illness. Such as,
Absence from work
Home care during extended periods of illness
Lifestyle modifications should the illness lead to not being able to work anymore
3) What does a person need to know before buying this type of cover?
The severity levels and the definitions of the various dreaded diseases covered.Does the assurance cover multiple events. The older cover paid once off. The newer assurance covers for multiple events.
The assurance is normally an accelerated death benefit. Claims will therefore reduce your life cover and because of the illness you will probably not be able to get more cover.
4) What are the benefits of having this type of cover?
A successful financial plan makes provisions for all life changing events. Severe illness is one of them. The provision should provided adequate capital to allow you pay for the costs associated a severe illness for the duration it takes to get well and back to a normal life.
5) How does age and gender fit into this type of cover?
Underwriting is based on risk factors and age and gender are some considerations. Certain dreaded diseases are experienced more so with certain genders and at certain ages.
Cancer is more prevalent in the 50 plus age group than, say, the 30’s. Breast cancer is obviously a bigger threat and concern to women than men.

6) Core diseases covered by dreaded disease cover?
Core diseases are more prevalent.
Heart attack, cancer, stroke and CABS…coronary artery bypass surgery….
The benefits have been extended to scores more which have less of an occurrence.
Safer to apply for a comprehensive cover, however, will cost you more…

Speak to a financial planner who will advise on how much severe illness cover you should apply for and study the benefits carefully so that you understand what the cover will provide.

Fees are not an excuse not to save…

In a recent interview with National Treasury, the concern was that most of us are not saving our retirement funds when we change jobs. The discussion pointed to fees and the impact the costs have on returns. Fees were singled out as the reason why people are not saving. Perhaps the problem is deeper. We are living beyond our means with the notion that “it will be alright on the night”, so let’s just take care of now.
Unfortunately, debt does go away by itself. It is far easier to prevent that to cure. I believe it all about attitude which starts with a sound financial plan.Unknown-1

Let’s take a look at how fees are applied to investments.

The reality of fees on investment products. When choosing an investment be aware of the pros and cons. It’s about horses for courses. Here are some things to consider:

The period of the contract
Contracts bind you to a predetermined period. The longer the term the more unlikely you are to keep up with the investment.
Let’s face it. It sounds like a great idea to take out a policy for the next 20 years. It gives you the idea that you will be forced to save for that period of time and at the time you probably think that it is quite feasible to keep up with the premiums. However, things get in the way.
Life changing events:
Getting married
Buying a house
Buying a car
Having children
Unforeseen life changing events such as:
Loosing your job
Getting divorced

If you stop paying your premiums on traditional policies the cash value before the contractual period is over, you will be charged by having your cash value adjusted to the amount that the service provider would have made on fees to the remainder of the term. These polices have the advantage providing benefits such as premium waivers at death and disability. Again, you pay for these out of your premiums, which means that for the R100 you invest, you may only have say, R80, invested (depending on age and health), for the assurance.

Policies, as with most other investments, have three main fees:

Admin fee – generally, 0.5% of the value of the policy fund
Asset manager fees – generally, 1,5% of the fund
Advisor fees – 0,5% of the fund value

If the policy is a traditional one then these fees are advanced up from at a discounted rate depending on the therm of the policy.
If a ‘new generation policy, then these fees are deducted on each premium and the balance is then allocated to the investment.
Less admin – 05%, less 0,5% for advisor, less 1,5% for asset manager = 2,5%
Which translates to a R97,50 allocation to your investment.

If you stop this type of product then there are no penalties because the service provider has not advanced any fees in the form of commission.

It it therefore a trade off between:
your probability of keeping up with the policy for the duration of the term and adding benefits