On the latest episode of the Challenging the Standard in Financial Advice podcast, Shail Singh, lead ombudsman, investment and advice at the Australian Financial Complaints Authority (AFCA), discussed why the conciliation process is so important when resolving conflicts between an adviser and a disgruntled client.
Explaining the premise behind conciliation, Singh described it as the “warm and fuzzy version” of conflict resolution, prioritising the coming together of both parties to land on their own outcome.
He added: “It is not adversarial.”
Singh said that conciliation is often the best way to resolve conflicts, allowing all parties to feel heard, and hopefully reduce the level of fallout following resolution.
“Generally, we find it works really well, and if a matter resolves in conciliation, it is the best way to resolve the matter. Believe it or not, it can even lead to, I won’t say increased satisfaction with the financial firm, but no loss of reputation to the financial firm, and that, I think, comes from the fact that the consumer is able to explain themselves,” he said.
“We always talk about money and things, but a lot of the time, it’s like, ‘Oh AFCA, you’re the first ones who’ve actually heard me and heard what I had to say’. It’s a really interesting sort of dynamic, and generally leads to the greatest satisfaction.”
Singh also highlighted the important fact that AFCA can’t force anyone to take part in the conciliation process if, for whatever reason, they don’t want to. He said that they will generally encourage people to, but in the case they refuse, AFCA is then forced to move to the next step of issuing a recommendation.
When asked what would happen if the consumer was to refuse the conciliation process, potentially due to emotional distress, Singh responded that it is rare for a consumer to not want to attempt conciliation with an adviser.
“You would think that sometimes there’s [internal dispute resolution] and it’s all antagonistic when they get there but then it’s like they’re desperate for conciliation, because … it is about money to an extent, but it’s also genuinely about being heard,” he said.
“I think this is the lesson to take into internal dispute resolution, that even if it’s painful, hear the consumer out. They want to tell you how hurt they are that they trusted you and you’ve lost the money, and you need to just let it all come out.
“Conciliation is all about getting the emotion out, and then we can really focus on what the real issues are. And often, they’re too completely separated. Most of the time around conciliation, everyone’s at the emotional stage, and that’s why you can’t resolve it.”
Singh also noted that what some clients want from the conciliation process is to be heard, for the harm to be acknowledged, and for them to receive an apology.
“Believe it or not, sometimes we do get people who, maybe they don’t take no compensation, but they take a significant amount less than they’re entitled to, because the advisers apologised,” he said.
“We’ll say to them, ‘Look, if this goes further, you might get more’, but they say, ’That’s OK, they’ve apologised, that’s a fair outcome’, and we move on.”
Podcast co-host Jordan Vaka added that due to the general nature of financial advisers, they often “jump to solutions really quickly”, which can, in turn, deprive the client of their voice.
Responding to this, Singh said that this is a common occurrence among professionals, adding that they need to prioritise listening before they go into problem-solving mode.
“A lot of lawyers do too, Jordan, and it is one of the big training points, if you like, when we bring new staff in and new lawyers in not to solve the problem, but to do the listening, and encourage the parties to do it themselves. But financial players are professionals, they do exactly the same thing. So, really encourage that sort of listening first,” he said.
AFCA are delusional. How can it be fair if one side is paying for it. The minute the process starts, the adviser is purely looking for the most cost-effective way to come out of it. Even if that means apologising when they did nothing wrong.
They dont force anyone to engage in conciliation, but it is PI insurers and lawyers that are directing the entire process knowing that the adviser is stuck balancing the cost of the excess on their claim and increases in premiums, versus the ongoing costs of the action.
And AFCA membership is compulsory, so they are not accountable no matter how poorly they conduct the process.
It is hardly warm and fuzzy.
And all of AFCA’s self congratulatory analysis ignores the fact so many complainants are paid off before the matter gets to AFCA, even when the adviser has done nothing wrong. The costs of the AFCA process and risks of an unfair outcome are so high, many licensees are willing to pay up in advance to minimise potential losses.
AFCA is just another element of the hot mess of bad regulation that makes professional advice more complex and expensive than it needs to be for most consumers. AFCA should be for product companies only. Advisers should have a single disciplinary body, as per the Royal Commission recommendation everyone seems so willing to forget.