Lauren Ryan from Thinktank speaks to Laurence Parker-Brown for our IN60 series. The Inside Adviser
That consumers are influenced heavily by well known, trusted brands comes as no great surprise. What does, though, is that they rate life insurance as the least most important tool in ensuring financial security.
Financial complaints soar, but advice no longer the driver: AFCA
Cases presented to the Australian Financial Complaints Authority topped 100,000 for the first time in 2023, a 23 per cent increase on 2022 largely attributable to scam-related complaints, insurance claim issues and a failure of financial services providers to deal with matters using their own dispute resolution mechanisms according to the authority.
Consumers were paid $304 million in compensation and refunds as a result of contacting AFCA in 2023, and increase of 38 per cent on the previous year.
Financial advice, however, which has been in focus at AFCA since the 2018 Hayne Royal Commission, is no longer a top driver of complaints with the authority.
AFCA previously noted that inappropriate advice claims dropped from 534 to 241 in 2021(FY), while failure to act in the client’s best interests (from 525 to 281) and service quality (from 674 to 570) also fell dramatically. In an article posted by David Locke, chief ombudsman and chief executive of the authority, he noted: “We have seen complaints to AFCA about financial advisers fall in the wake of Hayne.”
A surge in scam-related complaints is the biggest driver in the increase, with these almost doubling in the past year, up 95 per cent from 4,611 in 2022 to 8,987 in 2023. “They continue to be of great concern to us,” Locke stated, adding that a financial services scam is a “serious crime that is testing boundaries”.
Higher interest rates and inflation are also playing their part in driving the number of complaints higher, with cases involving financial hardship also significantly higher according to AFCA.
The current rate of complaints reaching the authority cannot continue, Locke said, noting that the volume of complaints being escalated to AFCA is “unsustainable”.
The most complained about products in financial services are personal transaction accounts and credit cards, with a clear link between these items and the rise in scam-related complaints.
The proliferation of scam-related complaints being directed to AFCA is again reflected in the most complained about issues recorded, with an almost 50 per cent increase in unauthorised transactions.
To combat the rise in scam-related complaints, the authority says both the government and industry need to play their part. “As we head into the new year our hope for 2024 is that this will be the year that anti-scam initiatives by industry and government finally disrupt this serious and organised crime,” Locke said.
The ability of financial services firms to resolve complaints earlier using their own internal dispute resolution systems must also be strengthened, the authority believes. With three of the top five issues relating to insurance claims, a lot of this work will need to be done in the insurance sector.
“We also need to see a downward trend in complaints overall, with financial firms working better to support their customers and to address complaints quickly and efficiently in-house,” Locke stated. “We believe many financial firms could be doing a better job of handling complaints within their own internal complaints processes, so only the most complex cases reach AFCA – which is the role we are meant to play.”
Without this change, consumers will continue to bare the brunt of complaints handling inefficiencies.
“The volume of complaints reaching us is putting unnecessary pressure on the external dispute resolution system and inevitably causing further delays for consumers.”
