Home / Advice complaints remain low despite 2020 increase

The Australian Financial Complaints Authority (AFCA) was established in 1 November 2018, combining the Financial Ombudsman Service, Credit and Investments Ombudsman (CIO) and Superannuation Complains Tribunal (SCT) into a more efficient and well resourced group. Covering most aspects of the financial services industry, the data was naturally tilted towards complaints against the banking sector and particularly in relation to banking products.

In the 2019-20 financial year, AFCA reported that 80,546 complaints were received, a 14% increase on the previous year. Of these the majority were resolved quickly, with an average of 73 days and $258.6 million in compensation awarded. The vast majority of complaints during the period were for banking and finance-related products and services, where 46,820 were directed. These were primarily focused around issues with credit cards, home and personal loans.

In a positive reflection for the financial advice industry, “only” 6% of complaints were directed at “investments and advice” issues which includes SMSF-related concerns. For the 12 months to September, this amount was 4,595 of the total, an increase from 2,701 recorded to August, but still a minority of those assessed by the complaints authority. Of those recorded, it was a reasonably even split between share trading, 669 complaints, and forex trading, 633, with the latter typically involving higher frequency trading and leveraged option or futures positions which became popular during the pandemic. Super funds and mixed asset funds received 424 and 388 complaints respectively.

The financial advice industry was the primary target of the companies, representing over 20% at 962, with derivatives and trading providers next at 607 and managed investment schemes recording 585 complaints. The range of complaints for financials is as wide and varied as you would expect, with the most ‘popular’ complaints generally being due to the provision of misleading product information. This is likely to centre around poorly disclosed fees or given the volatility in 2020, investments actually being higher risk than the complainants expected.

Inappropriate advice continues to represent a significant portion alongside the failure to follow instructions regarding investment transactions. More granular information as to whether this relates to the timely sale of investments, rollover of superannuation funds or other similar events has not been made available.

The results of the survey should not be unexpected, given that AFCA covers the entire financial system and the banking sector undertakes by far the majority of transactions. However, given the backdrop and media attention directed towards the financial advice industry in recent years, the consistently low level of complaints should be seen as a positive trend in the context of the professionalisation of the industry.

The Australian Financial Complaints Authority (AFCA) provided an update on their complaints and resolution environment at the recent SMSF Association Conference, highlighting a number of important trends. They delivered information covering the 12-month period to August and September 2020 with some interesting insights for the industry.

AFCA was established in 1 November 2018, combining the Financial Ombudsman Service, Credit and Investments Ombudsman (CIO) and Superannuation Complains Tribunal (SCT) into a more efficient and well resourced group. Covering most aspects of the financial services industry, the data was naturally tilted towards complaints against the banking sector and particularly in relation to banking products.

In the 2019-20 financial year, AFCA reported that 80,546 complaints were received, a 14% increase on the previous year. Of these the majority were resolved quickly, with an average of 73 days and $258.6 million in compensation awarded. The vast majority of complaints during the period were for banking and finance related products and services, where 46,820 were directed. These were primarily focused around issues with credit cards, home and personal loans.

In a positive reflection for the financial advice industry, ‘only’ 6% of complaints were directed at ‘investments and advice’ issues which includes SMSF related concerns. For the 12 months to September this amount was 4,595 of the total, an increase from 2,701 recorded to August, but still a minority of those assessed by the complaints authority. Of those recorded, it was a reasonably even split between share trading, 669 complaints, and forex trading, 633, with the latter typically involving higher-frequency trading and leveraged option or futures positions which became popular during the pandemic. Super funds and mixed asset funds received 424 and 388 complaints respectively.

The financial advice industry was the primary target of the complaints, representing over 20% at 962, with derivatives and trading providers next at 607 and managed investment schemes recording 585 complaints. The range of complaints for financials is as wide and varied as you would expect, with the most ‘popular’ complaints generally being due to the provision of misleading product information. This is likely to centre around poorly disclosed fees or given the volatility in 2020, investments actually being higher-risk than the complainants expected.

Inappropriate advice continues to represent a significant portion alongside the failure to follow instructions regarding investment transactions. More granular information as to whether this relates to the timely sale of investments, rollover of superannuation funds or other similar events has not been made available.

The results of the survey should not be unexpected, given that AFCA covers the entire financial system and the banking sector undertakes by far the majority of transactions. However, given the backdrop and media attention directed towards the financial advice industry in recent years, the consistently low level of complaints should be seen as a positive trend in the context of the professionalisation of the industry-