The government’s new external dispute resolution framework will make financial advice even more inaccessible to consumers, while the single EDR body’s lack of accountability is concerning, the Association of Financial Advisers has said.
In May, the government introduced the new external dispute resolution (EDR) framework for the financial services sector that will instate a single complaints body called the Australian Financial Complaints Authority (AFCA) to replace the multiple dispute resolution bodies currently operating – one of which is the Financial Ombudsman Service.
In a recent submission to Treasury, the AFA warned against the monopoly that will be created by instating a single EDR complaints authority.
“Without competition, it is possible that the focus upon operational excellence will disappear and there will be no incentive to deliver cost effective dispute resolution services,” the AFA said.
“This is a system that has the potential to be abused without the right accountability measures in place.”
The AFA went on to say that the new EDR system will increase the costs of providing financial advice in the future.
“These expected cost increases have the potential to reduce some consumers’ access to quality financial advice and could lead to some smaller licensees exiting the market due to increased professional indemnity costs,” the association said.
The government must re-evaluate how the new scheme is going to be established and resourced, and implement measures that strengthen the accountability of the new scheme, the AFA said.
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