G N I T N E V E A G N ING A R M P ND A sputes l Di Fi nancia by FIDReC Stori es
By Eunice Chua CEO, FIDReC
In recent years, the Financial Industry Disputes Resolution Centre ("FIDReC") has seen an increase in the claims filed by consumers against financial advisers licence holders and insurance brokers. Most of these claims related to allegations of inappropriate advice, misrepresentation or disclosure issues. Most commonly, the product involved was investment-linked insurance products. Through two case scenarios, this article provides some tips to prevent and manage financial disputes.
the shopper
Mary was an administrative assistant who would be retiring from her job in a few years. One afternoon, Mary went shopping at a mall when she was approached by a financial advisor, John, during a roadshow. John told Mary that she could convert her local bank savings account to a "saving policy" that could earn her interest at 3%. Attracted, Mary sat down to listen to more. She heard John say that she could draw or save yearly for a maximum of 15 years. She later purchased the product with a view to save for her old age. However, when Mary chatted with her financial advisor friend some months later about this policy, she was shocked to discover that the policy was an insurance plan and that she would have to pay monthly premiums of $1,000. She worried that she would not be able to finance the premiums after she retired. She approached the relevant financial institution to ask if she could be refunded the amounts she had paid. After a few unfruitful discussions, she was referred to FIDReC.
The Expatriate
Tom was a busy expatriate. He ran a small business and had two young children who would soon start school. He was introduced to a financial advisor, Mark, at a social event and shared with Mark that he had some modest savings of $50,000 that he wanted to set aside for his children's education and other future plans. Tom later met up with Mark again. After going through a financial review questionnaire with Tom, Mark recommended a certain investment-linked insurance product to Tom and went through the policy benefits. Tom understood that he had to make an initial contribution of $45,000 and thereafter pay a sum of $700 every 3 years. The initial contribution would double as this product qualified for a special benefit. Tom purchased the product after some further email exchanges with Mark.
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Later, Tom discovered that he needed to make a yearly contribution of $20,000 for 20 years. He felt worried as his children would soon start school and his expenses would increase. He believed that he had been mis-sold a product unsuitable for him and complained to the relevant financial institution. He wanted a refund of his initial contribution and to terminate the policy. The financial institution refused and said that Mark had not done anything wrong as he had explained the product fully to Tom. Dissatisfied, Tom approached FIDReC.