The analysis of over 1,000 AFCA advice complaints by compliance consultants Fourth Line revealed that financial services providers were able to successfully defend around 36 per cent of all claims.
The success rate was higher for insurance claims, at 56 per cent, while just 22 per cent of investment complaints and 29 per cent of super complaints were able to be successfully defended.
The vast majority of complaint claims paid – 87 per cent – related to pre-implementation issues rather than post-implementation, indicating that “the initial advice process carries the greatest risk”, according to Fourth Line.
SMSF advice was by far the riskiest category for complaints, with 65 per cent of all paid claims relating to SMSFs, and 91 per cent of all paid super claims being due to SMSFs.
Complaints related to SMSF gearing, limited recourse borrowing arrangements and real estate investment all increased in 2020, the firm said.
More than $14.6 million in advice-related complaint claims was paid in 2020, an almost 70 per cent increase dollarwise on 2019 claim numbers, which amounted to $8.6 million.
“A part of this increase can be attributed to similar significant increases in complaint numbers and the increase in AFCA’s complaint limits since 2018,” Fourth Line pointed out.
The firm noted there had also been a significant jump between the 2018 and 2019 numbers of advice complaints paid, from $3.3 million in 2018 to $8.6 million in 2019.
The average complaint payment amount was $137,416, a dramatic rise from the average of $104,898 in 2012 and another indication that higher AFCA limits were having an impact, Fourth Line said.
This is what I read in the article.
$14.6M of advice related claims. Avg Claim $137K. Therefore ~ 106-107 claims. Let’s say 65% are SMSF/Loan/Property related (which i would also assume are the larger payouts) means about 37 claims against ‘real’ financial planners doing their bread and butter advice.
If there are let’s say 12,000 FASEA completed, non SMSF/Loan/Property FP’s out there this is a claim rate of 0.003% of advice failure.
Can I also guess, that a lot of these may well have been – let’s pay the money it isn’t worth defending??
There is an underbelly to financial planning where people are pushing past the limits until they get banned but they can make hundreds of thousands in-between. Selling SMSF properties is a favourite.
In other words, there are very few successful complaints against normal financial advisers.
not surprising given the property spruikers who thrive by cold calling, then getting a FP involved to put there name on said recommendation. obviously the FP is on the hook as they are the only one licensed- easy win for AFCA.