Presenting at the SMSF Association National Conference 2021, AFCA lead ombudsman for investments and advice Natalie Cameron said as of August 2020, just 20 per cent of advice complaints were resolved at the earliest ‘registration and referral’ phase of the AFCA complaints process.
“It’s interesting that we have a low number by comparison of advice complaints that resolve early,” Ms Cameron said.
“For the investment and advice space only 20 per cent of complaints were able to be resolved as soon as they come in the door – that compares to 51 per cent of banking and finance complaints.”
The advice sector was one of the worst performers in terms of early complaint resolution, with 45 per cent of general insurance complaints and 30 per cent of life insurance complaints resolved at the earliest stage.
However Ms Cameron said the number of complaints received in the investments and advice category was generally low with just over 2700 complaints received in the 12 months to August 2020, representing 2 per cent of AFCA’s 80,000 total complaints in the period.
In terms of complaint types, 771 related to misleading product or service information, while 581 were around inappropriate advice. A further 497 related to failure to act in the client’s best interests and 426 were around failure to follow instructions.
Roughly a third of investments and advice complaints received over the 12 months were not able to be resolved as they were outside of AFCA’s rules, while 26 per cent were eventually resolved by the financial firm. A further 14 per cent proceeded to negotiation and 10 per cent were discontinued.
Ms Cameron said 19 per cent of AFCA members in the advice sector had complaints lodged against them during the 12-month period.
19 % of AFCA members had complaints lodged against them. ie one in 5 planners had a complaint in the last year…. that sounds out of control
Without providing greater context, I don’t see how AFCA can claim financial advisers are ‘lagging’ on complaint resolution. Potentially, financial advice claims could be for larger amounts, so the adviser or PI company may be more inclined to fight it. Financial advice claims are probably, on many occasions, small businesses rather than large institutions. A small business may be more inclined to fight to protect their reputation, rather than rollover like a large company. Who knows the real reasons, but without providing the appropriate context, AFCA could be misleading the public with this statement.
The main issue revolves around the fact that the AFSL has to wear costs, which is as per the AFCA guidelines. Where it is unfair is the fact that where a decision initially is rejected, after overwhelmingly determination (in favor of the AFSL) that such a rejection should be at some financial risk to the complainant who is rejecting, otherwise it just encourages a vexatious attitude knowing that no costs would be incurred. They just roll the dice to take it to panel knowing that they pay no costs, and even though the AFSL accepts the decision, then by going to panel they have to wear the costs even if they are vindicated again.
The compliant should put up some funds to stop vexatious appealing. Otherwise at this stage there should just be an independent “peer” review.
For small AFSL holders, this could be financially devastating.
This isn’t a new issue and has been around for sometime with FICs and FOS, previous ombudsman services.
At face value it becomes a nice little earner for AFCA to extend the complaint for the same result.