THE POWER REPORT

I'VE never really been sure what happens to money in a bull run, a bear run - or, heaven forbid, a major chicken run.

From derivatives to dividends, accelerators to accumulators, the financial world is a jargon hunter's paradise. And usually hell for Joe Average. Which is why most of us pin our hopes on sound advice from reputable financial brokers and intermediaries who help demystify the terminology and guide us in our choices. We trust them with our hard-earned cash - sometimes even our life savings. Most are honest professionals who possess skill and a sound moral compass.

But the 2010 annual report of the Ombud for Financial Services Providers, released this week, suggests not all are as skilled - or noble - as they should be.

Two things struck me in the 65-page report : how vigilant one needs to be with financial advice and products, and how invaluable the ombud's office is when things go horribly wrong.

The ombud is empowered by the 2002 Financial Advisory and Intermediary Services (FAIS) Act to protect consumers against the misrepresentation of financial products and misleading and inappropriate advice.

It's a free service to consumers who have been treated unfairly, and has jurisdiction over financial services providers including brokers, insurance companies and banks.

In the 2009/10 financial year, nearly 600 complaints were resolved, with R24-million paid out in compensation. These included new complaints and those from previous years, but almost 75% of new complaints were closed in the same year.

Of the 7647 complaints received - up 3% - 2653 fell within the FAIS ombud's jurisdiction.

This was up nearly 25% on the year before. Nearly 40% of complaints were incorrectly sent to the FAIS ombud and were referred to other ombuds or financial service providers.

The target of most gripes were long-term insurance products like life, disability and dread disease cover; short-term insurance products such as household, car and travel; and investment products including endowment and unit trusts.

Most complaints (26%) came from Gauteng, followed by KwaZulu-Natal (13%), Western Cape (9%), and Eastern Cape (7%).

The fewest complaints were from the Northern Cape (2%).

Ombud Noluntu Bam says in her operational report there are still too many instances of products "being designed merely for the benefit of the institution itself". There are also the "more obvious manifestations of human greed".

An issue of particular concern to Bam is car alarms. "It is not uncommon for an insured to only find out at claim stage that their insurance claim is repudiated on the basis that their vehicle alarm does not meet a particular Vesa standard," she writes. (See box on this page)

Bam admits the ombud office's decisions have been unpopular in some quarters because they have gone against long-established practices.

But "the mere fact that a course of business has been conducted in a certain way for decades does not in any way imbue it with the force of law or some moral certainty", she writes.

"It is required of us that we make these decisions even though wiser counsel may advise against it. If it fails constitutional and moral guidelines then such practices have no place in our society."

Bam accepts that financial institutions must make a good profit, underpinned by good corporate governance and moral values.

"However, the principle that we subscribe to is that ethical and moral practices are sustainable and by no means incompatible with commercial success."

Hear, hear.