Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Adviser complaints continue to fall
It was a busy week for the now three-year-old Australian Financial Complaints Authority (AFCA). Among the most important institutions in the financial advisery sector, the external dispute resolution body deals with complaints against most parts of the financial and investment sectors in Australia.
A pre-determined review of the operations of the group found that it continues to be “operating effectively and meeting its statutory requirements,” with the Federal Court happy with AFCA’s progress.
The report highlighted 14 key recommendations where the body and its communication with both external parties and members could be improved. Among the more powerful recommendations was that “AFCA should improve the transparency of its fees for financial firms.” This couldn’t be more timely with a growing range of cost and administrative pressures hitting financial advisers at the current time.
The report reiterated that AFCA “should exclude complaints from sophisticated or professional investors” unless they have been incorrectly classified. This was an interesting choice, with the difficulty likely coming down to who is able to assess whether an investor is “sophisticated” and if AFCA will be relied upon to do this as well.
Systemic issues should be referred to ASIC or another regulator, with AFCA to cease any investigations into the systemic issue but continue dealing with individual complaints as appropriate.
While the financial advice industry garners the majority of the negative headlines, the report found that only 1.8 per cent of 1,238 of the 70,510 complaints received during the 2021 financial year were against the financial advice sector.
Natalie Cameron, AFCA’s lead ombudsman for investments and advice, congratulated the sector, saying “well done to everyone who’s out there trying to get it right and trying to provide great advice.” She highlighted the 33 per cent reduction in advice complaints on the prior year.
Part of the benefit may well be coming from advisers simply giving up on those areas of advice that are becoming too difficult to deal with, such as lower balances, insurance and debt. Of the complaints received, 29 per cent were found in favour of the complainant, with 63 per cent in favour of the advice firm. This may suggest that many complaints are due to investment performance and not necessarily bad advice.
