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.
Ombudsman seeks to simplify complaint treatment
The Australian Financial Complaints Authority, the external dispute resolution group of which all financial advisers must be members, this week announced significant changes to their assessment process of new complaints.
A wide-ranging review of the group highlighted issues occurring due to the actions of so-called ‘paid advocates’. These includes debt management and credit repair firms which had been lodging the bulk of claims, many of which were closed quickly, but ultimately taking up the time and resources of the group and reducing their ability to deal with larger issues.
A pilot program tested over recent years including the use of “merit assessment” in their early complaint reviews, with the approach ultimately found to make complaints handling “faster, cheaper and fairer” for all.
The key, the Authority said, was that an early merit assessment, rather than allowing the complaint to go through the standard process, would allow unmeritorious complaints to be identified early, primarily those were there is clearly no error, or financial loss.
Where it is found to be “without merit”, AFCA can discretionarily exclude it, something that reduced the fee charged by AFCA by as much as 75 per cent in a 3-month trial.
According to COO Justin Untersteiner, “our pilot was in direct response to feedback from members that the cost of paying for some determinations – the final, formal decision-making stage of our process – can outweigh the value of the initial service or product that was provided.”
Unfortunately, this resulted in many firms making a “commercial decision” to simply concede the complaint regardless of the merits.
With a large portion of complaints to AFCA being made against credit, superannuation and banking providers, “the issue was made worse by the conduct of a small number of third-party paid representatives using questionable tactics, with complainants refusing to consider a reasonable resolution in the earlier stages of AFCA’s process”, he said.
According to the press release, “merit assessment will be applied in cases where sufficient information about a complaint is available at an early stage and it clearly shows there is no error and/or loss.
Complaints that raise more complex issues, with significant documentation involved, would still require an investigation to reach a view on what has most likely occurred.”
