The delayed legislation of the government’s compensation scheme of last resort (CSLR) has resulted in a “significant number” of advice complaints being paused, according to the Australian Financial Complaints Authority (AFCA).
In an annual review released on Thursday, the industry body confirmed there were 3,888 complaints received between 1 July 2020 and 30 June 2021. However, many more have been put on hold because of the CSLR — a scheme which aims to provide limited compensation where a determination issued by AFCA that relates to a financial product or service remains unpaid.
“This is due to the insolvency of the financial firm and/or the failure to pay compensation in accordance with an AFCA determination,” AFCA said.
AFCA’s report comes only a day after major industry groups and associations, including the Association of Financial Advisers (AFA) and the Financial Planning Association of Australia (FPA), called on the government to expand the scheme.
The proposed scheme currently only applies to five financial products and services: personal advice on relevant financial products to retail clients, credit intermediation, securities dealing, credit provision, and insurance product distribution.
However, the government is now being urged to expand the scheme to provide compensation for all financial products and services that fall under the jurisdiction of AFCA.
Meanwhile, AFCA’s report also showed that financial advisers were the most complained about financial area during that period (748 complaints). However, it should be noted that it accounted for just 1 per cent of complaints received overall.
The main areas for complaints raised included service quality (674), inappropriate advice (534) and failure to act in the client’s best interests (525).
“Advice that is inappropriate, or not in the client’s best interests, is, by far, the biggest issue in the investments and advice area,” AFCA said.
Meanwhile, shares (950), foreign exchange (431) and contracts for difference (417) were the most complained about products.
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