AFA acting chief executive Phil Anderson told ifa the design of AFCA as a free complaint service for consumers had generated “a lot of angst” among advice licensees, who were charged a fee for each stage of the complaints process.
“Whilst the model for AFCA has been set by the government, it generates a lot of angst that consumers can complain at no cost and there’s nothing to prevent people who are frivolous from making complaints,” Mr Anderson said.
“Decisions are binding on the financial firm but not on the complainant, and there’s no mechanism to appeal decisions – there’s an independent assessor, but they can only make an assessment of the process and not the merits of the case.”
Mr Anderson said the association had put forward a number of suggestions to improve the balance of fairness in AFCA decision-making between consumers and financial firms in its submission to Treasury’s independent review of the ombudsman’s operation.
The review, which is a requirement of the legislation that established AFCA, was announced by Financial Services Minister Jane Hume in February and closed its consultation with industry at the end of last month.
Mr Anderson said one of the AFA’s suggestions was that dispute resolution data among licensees should be tracked to determine what degree of complaints were settled with no admission of wrongdoing, as this could indicate firms were resolving what may be unfounded disputes out of commercial necessity.
“There should be some tracking of decisions that are purely commercial, because the cost of paying something out might be less than the cost of proceeding with the AFCA action,” he said.
“That will apply in certain types of matters – if you’re got a complaint that the client did not get adequate services for the fees they paid and it amounts to a few thousand [dollars], it may simply be that the cost of defending it is more than the cost of paying it out, even though you might feel the matter has no basis.
“We do hear about those cases, and we also get feedback that some licensees are reluctant to allow matters to go to a final determination where they can’t guarantee the outcome and the decisions are public.”
The AFCA are a flee-ridden cancerous tumor on the financial services industry. Is it pure coincidence or just “bad luck” for the financial services provider (FSP) that over 70% of all complaints are miraculously resolved in favour of the complainant!?! No doubt these statistics are there to justify AFCA’s pathetic existence.
I have seen first hand the process AFCA goes through to increase and “puff up” a persons complaint, adding in more comments, reasons and basis for the complaint against the FSP just so they can have multiple ways to throw mud at them even though 80% of the complaint was never even thought of by the complainant, but AFCA will make sure more is added in so they can hang the FSP out to dry and charge them for each stage of the complaint and end up awarding the “poor and vulnerable” consumer a win then tell the government “Look at all these fantastic results we have been achieving!”
Some good points raised here. However, there is a cost of handling complaints against advisers, no matter how vexations or lacking in merit. Who should bear this cost?
Same as Courts mate – not hard.
Go back to the public sector…and just draw a parrellel and I think you’ll have answered your own question.
Right so any idiot has the right to make vexatious, zero merit complaints at no costs to themselves.
Massive financial and time costs to Advisers, who are made to pay !!!
Great idea …….. what that already exists.
Great comment AFCA.
Right. However who determines whether the complaint is vexatious or has zero merit and who pays for this work? On the point of going to court, I would assume that court costs would be higher than AFCA fees. I’m not convinced one way or the other just saying that you need to consider that someone needs to foot the bill. Would court or a government department handling these cases reduce the costs for advisors? What do you base this on? In my experience both courts and government departments are less efficient, more expensive and less timely.
To add. Then you have the Adviser Rating website who do not authenticate the reviews that anyone can post. What a joke. A website that commercially benefits from Advisers details who do not consent to use their details.
One complaint in 22 years is more than enough. Having suffered the disgusting Kangaroo court grief of FOS and a vexatious complainer, who wasn’t even the client but a girlfriend of the client. FOS declined claim twice, nothing wrong with advice but she wouldn’t go away and a final determination found partially in their favour just to get rid of them. Payout $100k out of attempted $500k claim. Total BS.
FOS then Ombudsman personally called me and explained it was the worst case management she had ever seen from FOS to allow such vexatious claims. Yet sorry we have to find something to appease these claimants.
What a disgusting joke.
2 years of pain, higher PI, etc all because these vexatious claimants can just ignore FOS / AFCA rulings and at zero expense to themselves keep complaining until they get an effectively guaranteed win.
Ever heard of Natural Justice FOS / AFCA ? Nope.
Just prey you never get in front of AFCA, if you do settle as you will surely loose.
Financial advisers should not be subject to AFCA. It should only apply to product providers. One of Hayne’s few sensible suggestions was a single disciplinary body for financial advisers, which by definition would remove them from AFCA, TPB, ASIC and Austrac.
So you want treasury to manage client complaints also?
Nothing to do with Treasury. Perhaps you are confusing the SDB with MIA Jane’s announcement about transferring FASEA’s policy making role to Treasury? That is completely unrelated. There is no SDB. If/when there is one, it won’t be Treasury. They only do policy.
AFCA should have to apply a threshold test as an ombudsman. AFCA is meant to mediate and not simply be a free legal service. Somewhere back in FOS, where generating more claims meant more staff and higher pay, the whole idea of helping those who were denied justice due to having already lost their money has been forgotten.
It’s the approach taken by AFCA that is at issue. Frivolous claims should not be accepted to start with.
I would suggest that a licensee doesn’t have to pay the afca fees if a case is found in their favour. The cost could be covered by higher fees for cases found against
I was gobsmacked when my licencee would not support me when a client ‘threatened’ to go to AFCA over a fully compliant LRBA advice strategy that was completed for a client who had signed a agreement to pay the $3,000 fee before the work was commenced. After speaking to the (unlicensed) accountant who claimed he’d have signed the ‘certificate stating he’d provided financial advice for $1,500, the client claimed the $3,000 for the 30 hours that went into providing the SOA was excessive and refused to pay. The dealergroup considered the potential cost of a complaint and insisted I drop the expectation of being paid for my work..
So AFCA is basically a revenue raidsing funcvtion at the expense of AFSL’s and Advisers. No cost recvovery from the complaining party in the event of the claim being frivoulous. Oh and if after paying the 3 stages you still want to agrue, then of to the Federal court at say $100K minimum. This is not justice. It is wrong….some may say this is essentially a dictatorship that we are under.
I worked for an insurance company for many years, and it was the exact same issue. A ridiculous amount of claims were paid when they shouldn’t have been because the claimant made a complaint. It was cheaper to just pay them than to go through the process, especially when the whole process was extremely biased towards the claimant. People knew that and therefore rorted the system. A proper complaints process should protect those who have a legitimate complaint without rewarding those who are lying, but I wouldn’t hold my breath for one.
This is why insurance premiums have gone through the roof. It’s easier for insurers to pay disputed claims and pass the cost onto existing policy holders. Mental health claims are particularly prone to this, due to the ease with which they can faked or exaggerated, and the big stick of the mental health lobby used against anyone who dares question the legitimacy of a claim.
Correct. Most declined TPD/SC claims go through two insurer reviews, then AFCA for a 12 month spin. I reckon 99% or upheld by AFCA. But major resources taken up by the insurer.
I used to defend advisers at AFCA on behalf of 2 banks. If the client sought $10,000 or under to resolve the complaint we would just pay them. It generally costs the bank $10,000 (ie AFCA send us a bill for $10,000) if the client is particularly angry and wants to fight it the whole way “Just to win”. And that directive came from the very top. It wasn’t commercial to fight something out of principle.