A new user-pays funding model proposed by the Australian Financial Complaints Authority (AFCA) would see 90 per cent members paying the same or reduced fees while larger institutions would face higher fees that more accurately reflect their usage.
Under the proposed model, a single registration fee would be introduced with a simplified complaints fee structure and five free complaints included for all members each year.
AFCA said that the user-pays approach and the buffer of free complaints would reduce the burden on smaller members including financial planning firms and brokers.
“It’s a fair, transparent and equitable model that is supported by strong data and modelling,” AFCA chief ombudsman and CEO David Locke told members.
“We have listened to what you have told us over the past few years and this has been used to design a model that rewards good performance and early resolution, and apportions fees fairly based on use of AFCA’s services.”
AFCA said that around 10 per cent of its members made up of the largest financial institutions would be expected to pay more to address the cross-subsidisation that has been present in its interim funding model since AFCA was established in 2018.
66 per cent of fees would be recovered from the 2.5 per cent of members that account for 66 per cent of all complaints received by AFCA.
The proposal follows an independent review of AFCA last year which recommended that the funding model better take into account the circumstances of smaller firms with improved transparency surrounding fees and how they are being used.
95 per cent of all licensed financial firm members of the AFCA external dispute resolution scheme, and 98 per cent of members in investment and advice, would only pay their annual registration fee each year at an estimated cost of $376 in the upcoming financial year.
“The amount a member has to pay above and beyond the low annual registration fee is totally within their control,” said AFCA COO Justin Untersteiner.
“Our user-pays approach incentivises firms to use internal dispute resolution to decrease complaints to AFCA. Firms can absolutely significantly reduce their fees and charges through improvements to their own processes and procedures.”
Modelling indicated that 94 per cent of AFCA members within investment and advice would pay the same or reduced total annual fees based on complaints data from last financial year, including a reduction for 16 per cent of these members.
39 per cent of insurance members would see a decrease in total annual fees, with 52 per cent experiencing no change and 8 per cent paying more primarily as a result of higher relative complaint volumes.
Across banking and finance, a third of members are expected to pay less annual fees, 53 per cent would see no change and 14 per cent would pay more, again mostly due to higher relative complaint volumes.
The proposal would also bring super funds under the same fee structure as other members with the scrapping of the superannuation levy, resulting in 82 per cent of super members paying fewer annual fees.
Following earlier discussions with firms and industry groups, AFCA is now seeking feedback on its proposed model from members and has launched a six-week consultation period including five webinars, the first of which was held this week.
The consultation period will close on 22 April before the model is taken to AFCA’s independent board for a decision in May.
Any changes would be set to take effect beginning on 1 July this year.
Just remove financial advice from AFCA altogether. It generates less than 2% of complaints, and a genuine single disciplinary body for financial advice should handle that role.
Maybe after the election when incompetent liar Hume gets kicked out, we might actually get the single disciplinary body Hayne recommended, rather than “Yet Another Disciplinary Body” which Hume delivered.