Advice grievances represent 1% of complaints

The Australian Financial Complaints Authority (AFCA) received 457 complaints in the advice area and closed 485 between 1 July, 2021 and 28 February, 2022, representing 1% of complaints and $9.2 million in compensation. 

Some 457 complaints were received related to advice during the period while AFCA closed 485. 

Speaking at an Australian Financial Association webinar, Shail Singh, acting lead ombudsman invest-ments and advice, said AFCA was tracking ahead of advice complaints “coming in the door”. 

“Ninety [advice complaints] go through to [the decision stage] so that’s a few more than the investment and advice average which is more like 20%,” Singh said.  

“Interestingly, a lot are resolved in rules review (116) and we have a pilot which has now rolled out more broadly where we're trying to work out un-meritorious complaints earlier and decline to consider them and really those ones where there's no loss or where the claim has so little merit that the prospects of successes are very low.” 

Overall, between July and the end of February, AFCA received 45,667 complaints, a decrease of 2.8% compared to 2020-21. 

Meanwhile, AFCA closed 1,966 of the 2,315 investments and advice complaints (representing 5% of total complaints). 

“We’re slightly behind where we need to be, we want to be closing the amount coming in,” Singh said. 

“But of course, that includes all the disputes that close in three days as well as the longer ones, so it is an average.” 

More than $13.2 million in compensation was awarded or obtained through AFCA with 50% of com-plaints resolved by agreement, or in favour of complainants. 

The average time taken to close investment and advice complaint was 129 days with 19% closed within 30 days, 25% within 31-60 days, 17% within 61-90 days and 40% greater than 90 days. 

“The aim is 90 days - you see we've got 40% over 90 days, which is not what we want,” Singh said. 

About three in 10 investments and advice complaints were resolved at the registration and referral stage with the top five product complaints consisting of contracts for difference (606), shares (413), self -managed superannuation funds (193), superannuation funds (183) and foreign exchange (180). 

The top five complaints received by issue were interpretation of product terms and conditions (577), service quality (341), failure to follow instructions/ agreement failure to act in client’s best interests, inappropriate advice (177). 

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Given that financial advice complaints are so low, many of them are "non-meritorious", and financial advice already has 7 other regulators, why is financial advice subject to AFCA at all?

AFCA is yet another element inflating the cost and complexity of advice for consumers. Not just via the AFCA fees advisers pay, but also the higher PI premiums required to cover AFCA risks, and the extra compliance & admin that needs to be built into the advice process to defend against potential vexatious complaints or biased AFCA hearings.

Stephen Jones, when you take over from the incompetent Hume, please include removal of AFCA from financial advice as part of your 100 day quick wins action plan.

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