The Financial Planning Association of Australia (FPA) has welcomed the new user-pays funding model proposed by the Australian Financial Complaints Authority (AFCA).
In a statement on Thursday, the FPA said the new model will significantly reduce the cost for its members in managing external complains.
“The FPA has been a strong advocate for simplifying the AFCA fee structure for financial planners and we welcome these proposed changes,” said Sarah Abood, CEO of the FPA.
“They will provide important cost relief to almost all of our members by simplifying and reducing the existing membership pricing and fees.”
Under AFCA’s proposed model, a single registration fee would be introduced with a simplified complaints fee structure and five free complaints included for all members each year.
AFCA said that the user-pays approach and the buffer of free complaints would reduce the burden on smaller members including financial planning firms and brokers.
“It’s a fair, transparent and equitable model that is supported by strong data and modelling,” AFCA chief ombudsman and CEO David Locke told members.
In its 2021 submission to the Treasury review of AFCA, the FPA outlined its concerns about firms incurring high fees and reputational damage from frivolous, vexatious and malicious complaints being allowed to progress through AFCA’s external dispute resolution (EDR) process on the request of the complainant rather than based on the merit of the complaint.
“In its submission, the FPA recommended a review of the AFCA funding model. The proposed AFCA funding model will help address these issues in a number of ways,” Ms Abood said.
“In the financial planning and investment sector (which AFCA bundle together for reporting purposes), only 4 per cent of firms go above five cases in a year and the FPA understands they are mainly in the investment area or impact very large advice licensees.
“Therefore members are very unlikely to pay more than the annual membership fee going forward in AFCA fees. This is a good outcome for FPA members.”
