Financial advisers and licensees are dealing with so much right now. To quote current popular language – it is “A LOT”.
As well as the now normal COVID anxiety, the legislative changes, care and concern for clients in trouble, market issues, economic challenges and changes, and the challenge of totally changing business models and studying while still running a viable business (and life) are “hectic”.
There is little wonder advisers are feeling victimised and overwhelmed. When people are getting challenging feedback on their job there are usually positive messages to balance the impact. Praise and positives are currently (and unfairly) few and far between.
However, I do need to provide another perspective on the AFCA and ASIC issues. Not all clients receive good advice. They have a right to complain and receive compensation if they are treated badly. I don’t have statistics on valid complaints, and most advisers do a good job, however like every industry there are still dodgy participants.
I have helped clients with the AFCA (and formerly FOS) process for valid complaints. I would like to note the following:
1. It is not easy. There is significant effort required to lodge complaints, and it is very confusing for people who don’t know much about financial planning or aren’t particularly literate or financially literate. It is hard for a client who has genuinely lost money and is struggling financially.
2. While there are likely clients “gaming” the system and lodging false complaints, there are also financial planners who bully clients. I have seen a practice use language tricks and intimidation, repeatedly claim they have done things without evidence, and even try to influence the AFCA process via personal contacts.
3. I have not personally experienced AFCA coaching the client to continue a complaint past a resolution stage (not saying it doesn’t happen).
4. There are many opportunities for input from the adviser. Firstly, the initial complaint to the adviser. Then initially with AFCA. Then in response to client submissions. Then at mediation stage (if applicable). Then again in response to anything raised in mediation. Then after an initial assessment from AFCA. Yes that involves a lot of work, however if there are appropriate records kept of advice and process you do have a chance to present these, and resolve along the way if you can.
5. If you check the past AFCA/FOS determinations (available online) there are numerous cases dismissed if they are just about investment returns. AFCA tell clients they can’t help with investment return complaints and state this on the website.
6. I had a false complaint lodged against me when I was an adviser. It was rapidly dismissed by FOS as all evidence was available to prove the claim was unjustifiable. Of course it was stressful and a huge waste of time.
7. I have given opinions to clients that believe they have a complaint that the evidence was not in their favour and often the complaint is a misunderstanding. I can’t tell them they shouldn’t try to complain, however I will not assist someone who does not appear to have a valid complaint.
8. AFCA lets people know they don’t need a lawyer.
9. If it is true that wholesale and sophisticated investors are using the AFCA system when they should likely go through the courts, that appears to be a problem.
10. With ASIC, there was a recent webinar with the FPA where Danielle Press stated that only 7 per cent of issues reported were investigated. Are they relying strongly on self-reporting of breaches by licensees? If so the people doing the right thing are penalised, as some (again a minority) self-licensed practices are not always reporting breaches. What about all the issues not reported though?
So, what happens when you have systems that both the clients complaining, and the advisers receiving complaints feel is unfair, slow and unwieldy?
What recourse should advisers have if they feel they are mistreated?
What is fair for clients who don’t understand and genuinely need help?
Are we all desperately hoping a new single disciplinary body will help both clients and advisers with a system that considers the law, fairness, and allows sufficient investigation from experienced industry insiders and consumer advocates to come to reasonable outcomes for both sides?
In the meantime, for advisers I recommend:
1. Keep records of everything, large or small. Keep every email, keep date recorded file notes of every conversation, keep records of your advice documents and supporting documents being delivered and explained. Record conversations and Zoom meetings if appropriate.
2. Don’t expect clients to understand everything. Even when they say they do, they often don’t. They don’t want to look or feel stupid. Constantly educate them.
3. Act for the clients, check your documents and present them in plain language without jargon. Best interests duty helps the clients and you.
4. Keep them happy with great rapport and service. Happy clients who know you well are less likely to complain.
5. If you have a complaint at practice level then handle it really well. Most clients want to be heard first, and compensated second. Most don’t want to take complaints further but will get very upset if they feel brushed off.
6. Be ethical and professional. Having reviewed many advice files, ethics are pretty easy to spot. Mistakes can be made by anyone but ethics shine through.
7. Get support if you need it. Take care of yourself so you can focus on your job and deal with challenges.
And let’s hope that the next acronym, SDB (Single Disciplinary Body), is the one we have been waiting for. Put some effort into advocating for this to be great and replace our current chaotic mess.
Melinda Houghton, Insider Out
Melinda the SDB does have the potential to solve many of the problems of expensive, over complicated regulation, and the resultant difficulties that creates for consumers in accessing affordable, professional advice.
However if it’s not properly set up and controlled, the SDB also has the potential to make things worse. We have seen with FASEA that well intentioned legislation can be a failure at implementation stage if controlled by people who have deep rooted biases or commercial conflicts of interest, and there is no ongoing oversight by the Minister or parliament.
Industry groups need to lobby hard to make sure the FASEA mistakes are not repeated when setting up the SDB.
The first balanced article, well written and hits the nail on the head.
I to am an ex planner who has helped an injured party through their AFCA and here are some thoughts:
1) Solicitors in Court or AFCA cost the complainant far to much.
2) The business complained about also does not have to engage a solicitor.
3) The process is not simple but is far better than the Courts.
4) The current volume of complaints should be a wake up call.
5) If the Financial Planning family don’t know there are advisers giving poor advice deliberately or
innocently then they are denying human behaviour.
The industry has allowed poor behaviours for far to long, this process is to put everyone back to what the insurance world was created for to help people achieve their goals and be fairly remunerated.
Interesting that ASIC would admit only 7% of issues are investigated. 7% is roughly the advice market share of licensed advisers. The other 93% of advice is given by accountants, real estate agents, mortgage brokers, and direct insurance/super employees. It’s pretty clear which 7% ASIC persecutes and which 93% they ignore.
This is a great article Melinda, so thanks for your personal insights about the complaint process and what proactive steps the industry should be taking to avoid the heartache. With respect to your recommendations, for item 4 I would add that every practice should be gathering feedback from their clients contemporaneously throughout the advice process. I have it on good authority that AFCA will take into account client feedback data as part of its complaint assessment and resolution process. There is at least 1 service available to support this approach.
Hello Melinda, I just attended the same session with the CEO of AFCA, and I did not have the same take outs that you did. From my perspective, AFCA was very encouraging about the good work that advisers do, and reported very low levels of consumer complaints against individual advisers. I was very heartened by David Locke’s conversation.
i love melinda, as she just forgets the most important issue, FOS = AFCA – Never will AFCA make a stand against the people that pay them. So wake up – as SCOTT would say ” how good is melnda”.