Communication key to minimising disputes

Financial advisers receive few complaints

Overall, I was pleased to confirm that only a small proportion of the complaints AFCA received were about financial advisers.

Between 1 July 2019 and 30 June 2020, we received 80,546 complaints, of which only 6 per cent related to investment and advice, and less than 2 per cent related to financial planners and advisers.

The majority of these were about the appropriateness of advice, whether the adviser has acted in the client’s best interests, fees and costs, failing to provide advice and misleading product or service information.

In total, only 262 of the 1,571 AFCA members who identify themselves as a financial adviser or planner had a complaint lodged against them, leaving more than 80 per cent with no complaints at AFCA in the 2019-20 financial year.

This shows that by and large, good, sound and honest financial advice is being given to consumers – who in the current climate might find themselves under immense financial distress, unemployed or uncertain about their financial future. Indeed, it may be a time where many consumers need financial advice more than ever.

However, of the complaints we do receive against the industry, there is a common trend: miscommunication or lack of communication – where a consumer has trouble contacting a planner, does not understand the wording of a policy or contract, or is confused about the information they receive.

So, what more can the sector do to support their clients, prevent complaints and minimise disputes?

Focus on open, simple and regular communication

As advisers know, the relationship between an adviser and a client is paramount. We encourage advisers and planners to ensure their communications are accessible, transparent and honest – especially during the COVID-19 pandemic.

While complaints against the sector make up just a small portion (1.6 per cent) of disputes at AFCA, the impact of COVID-19 could mean more disputes being lodged with us in the next 12 months – especially as the demand for financial guidance, advice, and counselling grows. Open communication during this time will reduce the number of complaints that make it to the external dispute resolution stage because you’ve caught them early on.

If your client seems worried about a particular fee, seems confused about advice or is simply stressed about their financial position – meet with them, reassure them where possible and follow up regularly to make sure you have answered their concerns. It is also important that you keep records of these conversations. When clients are angry or unreasonable, try and understand what is driving this behaviour and let them speak. Respond rather than react, stay calm and show empathy to de-escalate the situation.

Aim to resolve problems early

It is critical that you and your organisation can recognise and respond to a complaint quickly. Often consumers don’t understand that there is an internal complaint process they need to follow so they will come to AFCA before the adviser has had the chance to address the problem.

To resolve this, make sure your processes are easy for your customers to find and follow. Give them a clear path to raise issues with your team first, so that they don’t need to come to AFCA. We all share the same objective of seeing more complaints resolved by agreement before they need escalation to AFCA.

If you can’t resolve a complaint with your client and it does come to AFCA, be proactive at the internal dispute resolution (IDR) stage by being upfront and taking responsibility with the aim to resolve the issue quickly. Consider the time and financial cost of allowing a complaint to persist, as well as the loss of customer goodwill.

A key function of AFCA is to help you avoid complaints arising in the first place – or where issues do arise, providing the tools and support for you to resolve those issues yourself.

It is also important to proactively engage with AFCA if you have a complaint made against you. We want to understand your perspective, so the more information we can get, and the more openly you can engage with us, the better. Where you are the adviser and it is your licensee who is responding to the complaint, we are still keen to hear your perspective.

Support AFCA provides

We understand having a complaint raised against you can be a stressful and emotional experience, which is why we have resources and advice available to you should you need it. That is especially true now, when the pressures of COVID-19 are weighing on advisers and their businesses too.

We have a range of fact sheets and key material available on our member portal to help you understand and navigate the process, including EDR response guide on best practice for AFCA members – submissions to AFCA and topics such as inappropriate advice. We also publish Approach documents which are designed to give you certainty and consistency in dealing with us, and explain how we will we consider different issues such as adequacy of statements of advice and calculating loss in financial advice. We also publish information for consumers on how to best engage with their adviser, called managing financial advice. And we regularly engage in webinars, adviser panels, host online forums and have a dedicated membership services team to support you.

Our commitment to fairness

When we consider a complaint, we work as part of a team. You may be surprised to learn about AFCA people who have worked in the financial advice industry. We have financial advisers on our panels, as well as our board. Understanding the environment and industry you’re working in is critical to our ability to make fair, impartial decisions.

If a complaint reaches our case management stage or requires a determination, we will be fair in all circumstances. We understand advisers work in a high-pressure environment, and we appreciate the critical role you are playing in this period in supporting your clients during a challenging time. So, for example, rest assured that AFCA understands that markets can and do perform badly, and this doesn’t mean we will find against you. In fact, AFCA will usually rule out any complaints purely about investment performance.

We will be fair to you in terms of timeframes and give you the opportunity to provide your perspective. We will also grant extensions where they’re required. We will always provide you with a clear understanding of what the complaint is about and what our likely position will be on it, as early as possible.

Our goal and promise are to resolve complaints as quickly and early in the process as possible, fairly and efficiently in line with the AFCA Rules and our fairness jurisdiction.

We want to partner with advisers and licensees to prevent complaints and minimise disputes lodged with AFCA. The demand for high quality financial advice is increasing and people have never needed their advisers more. We find that nobody is more critical of poor advice practices than the vast majority of good advisers who work hard to care for their clients. We look forward to continuing to support you in protecting the reputation of this industry.

David Locke, chief executive and chief ombudsman, AFCA