Several financial planners have called for due process to be instituted to give advisers the ability to appeal against a determination brought against them by the Financial Ombudsman Service (FOS).
Financial planners should have access to the right of appeal in the High Court if FOS makes a determination in a financial services dispute that a financial services provider (FSP) must compensate former clients, according to David Middleton, practice principal of WHK subsidiary Prescott Securities.
“The amount of money that FOS is allowed to award – $150,000 and potentially increasing – is ridiculous, the sort of stuff that you would normally go to the High Court to get, and especially since they operate on unwritten law,” he said.
A FOS determination that is accepted by a former client is binding on an FSP, with no right of appeal or rejection within FOS or to another organisation.
“If it’s a small amount then you may as well just deal with it, but when it gets to $150,000 or more, then you’re starting to get into very expensive territory to have in the hands of people who are fundamentally untrained at anything legal,” Middleton said.
It could lead to a situation in which an adviser could institute a business process against their better judgement because they feared that if they didn’t they could be exposed to too much business risk, Middleton suggested.
One FSP was ordered by FOS last year to pay $110,000 in compensation to a former client. The maximum amount of compensation in an external dispute resolution scheme will rise to $280,000 in January next year.
Capstone Financial Planning adviser Allen Dillon said an adviser should be able to have a right of appeal if they felt aggrieved by a FOS decision, as it wasn’t always possible to get financial advice 100 per cent right.
“Everyone has the right to appeal a decision, even murderers,” he said.
Chief executive of Lonsdale Financial Group, Mario Modica (pictured), said he “absolutely” supported calls for a right of appeal to be introduced for financial planners and financial services companies.
However, Modica cautioned against making the Australian Securities and Investments Commission (ASIC) the arbitrator for hearing appeals against FOS decisions, since the regulator was too biased towards consumers.
Slater and Gordon practice leader Damian Scattini said that while a system of appeals could be implemented, he cautioned that the High Court was already very busy and any government seeking to implement an appeals system would have to take that into account.
“You have to resource things, because justice delayed is justice denied,” he said.
