Almost 2 in 3 adviser complaints successful

The analysis of over 1,000 AFCA advice complaints by compliance consultants Fourth Line revealed that financial services providers were able to successfully defend around 36 per cent of all claims.

The success rate was higher for insurance claims, at 56 per cent, while just 22 per cent of investment complaints and 29 per cent of super complaints were able to be successfully defended.

The vast majority of complaint claims paid – 87 per cent – related to pre-implementation issues rather than post-implementation, indicating that “the initial advice process carries the greatest risk”, according to Fourth Line.

SMSF advice was by far the riskiest category for complaints, with 65 per cent of all paid claims relating to SMSFs, and 91 per cent of all paid super claims being due to SMSFs.

Complaints related to SMSF gearing, limited recourse borrowing arrangements and real estate investment all increased in 2020, the firm said.

More than $14.6 million in advice-related complaint claims was paid in 2020, an almost 70 per cent increase dollarwise on 2019 claim numbers, which amounted to $8.6 million.

“A part of this increase can be attributed to similar significant increases in complaint numbers and the increase in AFCA’s complaint limits since 2018,” Fourth Line pointed out.

The firm noted there had also been a significant jump between the 2018 and 2019 numbers of advice complaints paid, from $3.3 million in 2018 to $8.6 million in 2019.

The average complaint payment amount was $137,416, a dramatic rise from the average of $104,898 in 2012 and another indication that higher AFCA limits were having an impact, Fourth Line said.