AFCA opens consultation on financial advice complaints
The Australian Financial Complaints Authority (AFCA) has opened a consultation into how it determines compensation for complaints for financial advisers.
A new approach document from the organisation will explain existing procedures and the principles behind them when making decisions, apportioning liability and awarding compensation for a loss in investment and advice complaints.
The consultation will cover how AFCA’s approach document considers:
- Liability and compensation in relation to financial advice firms and Responsible Entities (REs) where the advice firm has provided advice on interests in a managed investment scheme (MIS) including those MIS that have subsequently failed or become insolvent
- Proportionate liability statutes in relation to complaints involving financial advisers and MIS
- Its powers to join a party to a complaint if the party is an AFCA member, and
- Fairness when apportioning loss in these complaints.
“Formalising and publishing our approach document will support complainants and financial firms to better understand how we consider investment and advice complaints involving financial advisers and managed investment schemes and assist in efficiently and effectively resolving these disputes. It will also ensure AFCA’s approach to these matters is consistently applied by case managers and decision makers,” it said.
“AFCA has existing guidelines and documents to support the efficient handling of complaints involving financial advice. This guidance includes the AFCA Approach to calculating loss in investment and advice complaints, and the AFCA Approach to identifying a claim. These documents outline how AFCA decision makers work out how much compensation to award when a loss to a complainant is found to have been caused by a financial adviser.”
Stakeholders are invited to submit online or via writing and AFCA will also meet with directly impacted stakeholders and take feedback.
In AFCA’s 2022-23 annual review, it said it received 4,840 complaints about investments and advice but the majority of these came from two specific firms.
If these firms are excluded, AFCA said the number of investment and advice complaints will be 2,466, which is 22 per cent lower than in the previous year and continues a downward trend in complaints.
The number of complaints about inappropriate advice rose from 241 in 2021-22 to over 1,600 in 2022-23, making it the top complaint received by issue, followed by failure to follow instructions and failure to act in clients’ best interest.
Some 38 per cent of complaints are resolved at the registration and referral stage, up from 33 per cent in the previous year. The average time taken to close an investment and advice complaint is 112 days, up slightly from 106 days.
The consultation will run from 6 November – 1 December.
AUTHOR
Laura Dew
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How can you hold Financial Advisers liable for a managed investment going under? The financial adviser is not the one running the investment and has zero say in the day to day operations or investment decisions. Advisers go by licensee directions, and/or research houses to provide justification of the investment. Hold the people running the fund to account!
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