Your protection when buying Financial Products
Many pseudo financial service providers sound legit when they sell you all kinds of insurance contracts and loan facilities. This last week it was a selling organisation by name of Mzansi Money that came to the fore.
Today we will look at the way that you should react to their and similar presentations. Each time we fall for one of these offerings we are robbed of savings. These savings can buy your baby a car when they graduate one day, or provide more comfort to you in your old age.
The Mzansi call centre agent nearly promised a pre-approved loan. To qualify for the loan you had to buy an income protection policy. The agent was asked what would happen if the loan was not approved, to which he replied, that you then at least have the insurance policy. In this instance the sale of a product could be secured on the promise of a loan.
This is a lot like conditional selling, that has been out ruled for many years in South Africa. Even banks are no longer permitted to do this and cannot even grant a bond to you on the provision that you insure the building structure with them.
Mzansi and many other similar organisations are preying on an unsuspecting and financially overburdened public, enticing them with the promise of a loan to sell a product.
What we must do is investigate before we commit. On investigation these guys did not fare well at all. Go to the source and investigate. This is easy these days with the internet.
The investigation revealed the following facts:
- Even though they were selling financial instruments and products, the website did not reveal whether they were authorised to do so.
- There was no tab on ‘about us’ to investigate who the people are behind the offering
- The terms and conditions revealed that any loan was outsourced and could not be guaranteed (pre-approval of a loan thus appearing to be false)
- The income protector only granted a maximum of R10 000 cover for six months. This does not satisfy the expectation of an income protector that normally runs to retirement age or a minimum of 24 months.
- The underwriter of the product is not mentioned. This will not be a requirement if Mzansi quoted their FSP number; and, the underwriter of an insurance product, which this is, can be revealed later in a disclosure document when sent to the client.
Further investigation on the FSB website under a search for departments for FAIS, revealed that they are indeed not registered under that name as a financial service provider. Their website in one part claims that the solution is legit, but is not as revealed by the research.
If all this is true they are not permitted to sell any financial product to you or anybody else. Can they? Well, the above prove that they do.
Your rights when buying financial services are:
- You may only buy financial services from authorised FSP’s. Ask them if they are and get their FSP number
- The agent selling to you must be a licensed representative, gain proof directly, by email or fax.
- You may verify the FSP status by looking on the FSB website and doing a search under departments/FAIS.
- You can also look and see whether the agent you spoke to is on the license by searching under representatives
- Report misconduct to the FSB
- Only buy products when you understand them and how they will aid in your provisions program.
In a separate incident a company called Zest contacted me for credit life insurance, this after I declined it at a dealership after buying a car. When I declined again they tried to sell me medical gap cover. All this after I had ticked the box that I may not be contacted for any other services, proving that the transgressions persist and that we are prey to many opportunist selling events.
Beware, be vigilant and ask all the right questions before committing to sales by phone. It is often better to talk to a broker, but even so, do not buy at the first meeting unless you called with a very specific request for a particular product.
Rather give yourself some time to contemplate and elect to buy at the meeting after a full needs analysis was concluded, recorded and after being satisfied that your needs were addressed.
Deon Hattingh is a financial planner, assisting many to achieve the correct balance between risk and investment. He may be contacted on firstname.lastname@example.org