Amid continuing complaints from advisers that they believe they have witnessed the Australian Financial Complaints Authority (AFCA) “coaching” complainants, the Federal Treasury is under pressure to address the issue.
The concerns about AFCA coaching have been raised in the context of Treasury’s current review of AFCA alongside equal concerns about the manner in which the authority has also been perceived as inappropriately handling complaints from wholesale clients.
The concerns around AFCA coaching became public last year when the authority was censured by the NSW Supreme Court – something which then led to a change in the AFCA rules to address the issue.
Notwithstanding that rule change, the Financial Planning Association (FPA) has pointed out to Treasury that members have been raising complaints about the coaching by AFCA.
In its submission to Treasury as part of the AFCA review, the FPA said that its members had raised concerns about AFCA “coaching complainants through the EDR process”.
“This is not something we can provide case study evidence on. However, the FPA believe the concerns raised warrant Treasury investigating this issue further,” it said.
The FPA also suggested that “there is a need to assess AFCA’s internal systems and processes to ensure the scheme is performing in a manner consistent with its obligation to be independent and impartial to all parties”.
A dealer group director also told Money Management that he had first-hand experience of the terms of a complaint becoming progressively polished as the complainant had increasingly close contact with AFCA.
The concerns about complainant coaching come at the same time as both the Stockbrokers and Financial Advisers Association (SFAA) and the Association of Financial Advisers (AFA) raised concerns about AFCA’s willingness to deal with complaints from wholesale clients in seeming contravention of the intent of the legislation.
The SFAA submission told Treasury that different provisions in the Corporations Act apply to clients depending on whether they are retail or wholesale.
“For example, wholesale clients are not subject to the statement of advice requirements that retail clients are. Financial advisers who advise wholesale clients are not subject to the FASEA Code of Ethics or education requirements. This is because the Parliament has decided that wholesale clients don’t require the consumer protections that are afforded retail clients,” it said.
“It is not uncommon, however, for a client to suddenly ‘transform’ from a wholesale to a retail client when an investment does not perform as well as was hoped, and for them to lodge a complaint with AFCA to reimburse them for the market risk they took.”