Speaking at AIA Australia’s Adviser Summit this week, the acting lead ombudsman for investments and advice at the Australian Financial Complaints Authority (AFCA), Shail Singh, said AFCA received a total of 2,211 complaints related to financial advice in 2022.
A majority of these were related to Dixon Advisory, he shared.
“If you take Dixon Advisory out, we end up at 483 complaints received, which is down 47 per cent from the previous year,” Mr Singh said.
“The trend in advice complaints at the moment is down and a good one.”
Regarding the key issues highlighted by complainants, Mr Singh said a number are “system-type business issues” or firms engaging in business models that carry risk.
“For example, taking low-balance SMSFs and moving them into property is one. And there are a number of others, batch type of disputes which are more issues with the business model itself,” Mr Singh said.
Risk too, he noted, has “come up as a theme”.
“The issues are around either over-insurance or underinsurance.
“The nature of the disputes is that they are more complex and they are of a different character than they used to be and to be perfectly honest, they can be tricky to work through.”
Reflecting on the insurance side of AFCA’s oversight, Mr Singh said concerns have been raised regarding “people’s understanding of level premiums, how they operate”.
“Sometimes that dispute might be against both the insurer and the adviser themselves,” he noted.
Overall, he reiterated, “the numbers are coming down”.
Looking ahead, Mr Singh said AFCA’s areas of focus in 2023 include engaging with financial firms to prevent disputes from being raised in the first place.
“We’re one of the few businesses that are trying to put themselves out of business,” he said.
“What that means is that we don’t want a high number of disputes and the main aim is to get out there before consumers have a dispute and talk to financial firms and engage with them to try to encourage practices that will reduce dispute numbers.”
AFCA could soon be granted an elevated role in financial advice, with the government’s consultation paper on the planned education changes, released last year, arguing that it could help deem whether an adviser has a clean enough record for the purpose of the experience pathway.
Namely, the government has argued that relying on the Financial Adviser Register (FAR) alone to deem an adviser eligible for the experienced pathway “is not appropriate”. Instead, it proposes other sources for determining adviser misconduct including whether an adviser’s conduct has resulted in adverse findings being made against their licensees at AFCA, alongside CPD compliance, and disciplinary action taken by associations.
However, the Association of Financial Advisers (AFA) has argued that some complaints made to AFCA are vexations.
“We also have reservations as to whether an AFCA decision — which is not a disciplinary matter and is not subject to appeal — should be used for this purpose. It may also be the case that the complaint was received after the adviser left the licensee and was not given the option to defend their actions,” AFA said late last year.
[i]”There are issues around over insurance and under insurance”[/i]
Of course there are. Anyone who ever makes a claim will feel they are underinsured. Everyone who doesn’t will feel they are overinsured. But kangaroo court AFCA provides a forum for both sides of this equation to extort advisers. It is ultimately to the detriment of the vast majority of consumers, who find it increasingly difficult to access affordable insurance products and advice. AFCA is one of the reasons personal insurance is in massive decline, and society is heading for an underinsurance crisis.