The Australian Financial Complaints Authority (AFCA) charged nearly $30,000 for a panel considering an old complaint in the wake of the Federal Government allowing complaints lookbacks to 2008.
As well, significant concern has been expressed over the manner in which AFCA has moved into hearing what would be regarded as “wholesale client” complaints.
The Association of Financial Advisers (AFA) has told the Federal Treasury about the financial advice community’s concern about the Government’s decision in February, 2019, to allow AFCA to consider complaints going back to 2008 for a 12 month period from 1 July, that year.
“This was extending the timeframe back to a point beyond where it was mandatory to retain files, and licensees could be forced to defend matters for which they no longer held the records,” the AFA said in a submission.
“This was a decision of Government, however it had a broad impact. We have recently become aware of the fees that AFCA were charging for considering these older complaints, where a decision by a panel, for a complex matter, could cost $29,860,” it said.
“Whilst this is not a matter that impacts our members, who predominantly operate in the personal advice to retail clients space, we have also become aware that there is a genuine issue with respect to how AFCA has become an attractive option for wholesale clients.”
“This seems inconsistent with the intent,” the AFA submission said.
“The origins of external dispute resolution (EDR) schemes was a mechanism for consumers to seek redress with respect to less material matters, in a manner where it was not necessary to seek the support of lawyers. The limits and caps have risen significantly since that time. Seemingly the current model is very different to where this originated,” it said.
“The much higher limits and the model that is strongly biased in favour of clients has a very big impact on the Professional Indemnity (PI) Insurance market for financial advice, and PI Insurance is of course mandatory.
“Premiums have been rising rapidly in recent years and there are serious concerns about this market going forward. AFCA is an important factor in the considerations of PI Insurers. This adds to the rapidly rising cost of financial advice and the reduction in access and affordability of financial advice.”