Misselling – advice to 64 year old to move investments off-shore
In May 1999 the complainant retired and received a 1/3 lump sum. She invested this together with an inheritance at a bank in a money market account from which she drew an income. In August 2000 the complainant went to the insurer to seek advice on increasing the monthly contribution she made to a unit trust in her grandson’s name. The insurer’s agent, assisting her, advised her to reinvest her R400 000 investments in an off-shore investment housed in a policy. The complainant was 64 years old at the time of investment and she required an income. She was advised that she could draw £500 each quarter as income.
No formal needs analysis was done. When the investment dropped in value, the complainant contacted the adviser and he met with her on several occasions. At one of these occasions the adviser gave a personal guarantee that if the amount of the investment reduced beyond the original lump sum he would make up any shortfall. He also advised her to stop drawing an income so as not to erode her capital any further.
The insurer advised us that they did not regard the advice as inappropriate.
On the facts we were convinced that the adviser had persuaded the complainant to invest off-shore rather than her wanting an off-shore investment from the outset.
Our view was that it was inappropriate advice for a 64 year old retired pensioner, who has no other significant investment, to transfer her pension fund money from a South African money market account to an off-shore equity portfolio.
We were also not convinced on the documentation on file that the complainant had made an informed decision when she chose the investment on the advice of the insurer’s adviser. We interviewed the complainant and her husband and it became clear that she had relied on the agent who had convinced her that an off-shore investment was the route to go and had painted a very bleak picture of South African investment market. At no stage did there appear to have been any warnings about the risks attached to her new investment.
We advised the insurer accordingly.