Advice still major cause of complaints

Financial advice has remained the major issue in almost all areas of investment-related complaints filed with the Financial Ombudsman Service (FOS). 

Despite a 25 per cent decline in accepted investment-related disputes - and the largest ever decline in the managed investments category - inappropriate advice was the main cause of a large portion of complaints. 

The annual report published by FOS found many investors who placed their money into managed investments complained the advice they had been given was inappropriate and that it did not properly accord with their financial position, goals and tolerance of risk. 

"The majority (62 per cent) of managed investment disputes involved a financial adviser/planner or a managed investment scheme operator/fund manager (27 per cent)," the report said. 

The bulk of superannuation-related disputes were about retail funds and self-managed super funds (SMSFs), with inappropriate advice again being the most likely cause of complaints. 

"People who lodged disputes about self-managed funds were most likely to complain about inappropriate advice (38 per cent)," FOS said.

"Common issues in disputes about retail funds were inappropriate advice (20 per cent) and failure to follow instruction." 

While advice comprised the largest portion of securities-related disputes as well, complaints regarding life insurance were mostly between clients and insurance companies. 

Lead Ombudsman for banking and finance, Phillip Field, told Money Management FOS had identified a number of systemic issues related to the financial services industry - such as compliance failures and failure to properly monitor adviser activities - adding the Australian Securities and Investments Commission was notified of the issues. 

However, Field said FOS was happy to see a decline in accepted disputes, though the cause of complaints was unlikely to change. 

"As a result of the GFC we got more disputes about managed investment and life insurance, but as the effects of that taper off the number of disputes has certainly dropped," he said. 

"The overall mix in terms of the cause of disputes is fairly steady but as people start to get good returns the complaints [about financial advice] will probably decrease." 

FOS found an increase in life insurance disputes in the last financial year, but most were due to the decisions made by the life insurance companies with regards to claims.