Advice and investment AFCA complaints up 18% in FY25

Investment and advice complaints to the Australian Financial Complaints Authority (AFCA) increased 18 per cent in the 2024–25 financial year, according to its Annual Review, hitting 4,193. 

In its annual report, the complaints authority saw investment and advice complaints exceed 4,000 for the second time in five years.

This was an unwelcome sum after a 26 per cent decline in FY24, where it dropped to 3,559 after hitting 4,840 the year prior. 

The primary issue driving this increase in complaints was a failure to act in the clients’ best interests, which saw a 124 per cent increase in FY25, up from just 565 last year, accounting for almost a third (30 per cent) of all complaints in this category. 

This was followed by a failure to follow instructions or agreements with 432 and inappropriate advice – which was the top issue last year – with 393 relevant complaints, down from 706. The decrease, AFCA explained, was a result of the firm considering more Compensation Scheme of Last Resort (CSLR) cases, where advisers failed to act in the clients’ best interests. 

Other factors driving this increase in complaints, according to the report, were concerns about overall business models, including cold-calling, pressured sales tactics, conflicted advice, and undiversified and common product recommendations being made to the majority of a firm’s clients. 

“There is a clear link between a financial firm’s business model and complaint volumes. Recent high‑profile product collapses, which include the Shield Master Fund and the First Guardian Master Fund continue to drive this trend,” the report said. 

Notably, self-managed super funds (SMSFs) were also at the forefront of this surge, accounting for 1,323 (32 per cent) of complaints in FY25, more than doubling the 678 seen the previous year. 

Looking at investment products, shares followed SMSFs as a driver of complaints, making up some 1,168 cases (28 per cent), followed by cash management accounts, superannuation funds, and mixed asset funds, which saw 339, 338, and 205 complaints, respectively. 

With the CSLR now passing one year of operations, the scheme accounted for around a quarter (24 per cent) of all investment and advice decisions by AFCA in FY25, a proportion the firm expects will “continue to grow as more CSLR complaints are resolved”. 

“AFCA focused on finalising complaints that had been paused while awaiting the establishment of the scheme. All were completed except those involving Dixon Advisory, which remains the largest batch of complaints AFCA has ever received. While many Dixon Advisory matters were resolved in 2024–25, a significant number remain in progress,” the report said. 

For complaints eligible for the CSLR, AFCA found in favour of almost half (49 per cent) of complaints received, awarding $117 million. AFCA noted that complaints against insolvent investment and financial advice firms continue to grow, with 2024–25 marking the second-highest year on record, following the peak seen in 2022–23 when Dixon Advisory collapsed. 

Notably, the time for AFCA to close a complaint has increased, now sitting at an average of 150 days, up from 129 last year. Meanwhile, 1,500 cases were closed after more than a year, though this was partly a result of some complaints being inactive for extended periods of time due to insolvency, court proceedings, or some that were closed and later reopened.

The number of complaints finalised at the decision stage, the final step in the AFCA process, rose from 280 to 686.

“The increase at the decisions stage is largely due to AFCA now determining insolvent financial firm complaints after the establishment of the CSLR, noting that these complaints are not capable of early resolution due to non‑responsive insolvent financial firms,” it said.