They can attract a lot of attention – and rightly so, in many cases – but complaints against financial planners are a relatively small part of the complaints resolution world.
In the year ended June 30, 2013, the total number of disputes received by the Financial Ombudsman Service (FOS) fell by more than 11 per cent. The number of complaints accepted by FOS – that is, those that fell within its jurisdiction – fell by 5 per cent.
FOS accepted a total of 24,100 complaints during the year, and only 879, or about 3.7 per cent, related specifically to the “financial adviser/planner” category. By comparison, about 11,470 disputes related to banks, and about 7400 to general insurance companies. Life insurers attracted about 780 complaints.
Investments, life insurance and superannuation ombudsman Alison Maynard says there are several factors at play behind the reduction in the headline numbers – but she does not believe that one of them is a clearer understanding by the public of what financial planners do.
“The number of complaints has come down, as you can tell from the figures,” Maynard says.
“There’s a few things at play. I think a few firms have been removed from the market, and therefore they can’t give bad advice any more. The fact that firms are not out
there any more has an impact; we are now well after the GFC and so a lot of the big increases [in complaints] we had in previous years were in relation to advice given immediately preceding the GFC.”
Maynard says there is also evidence that professional indemnity (PI) insurers are tightening up on the sort of products financial planners can give advice on. She says that when agricultural schemes, along with structured and margin lending products are removed from an adviser’s arsenal, there is considerably less scope for loss.
“Also, I do think that the profession has been improving,” Maynard says.
“And it’s improving its handling of disputes. If they handle them internally, then we don’t get to hear about them.”
Maynard says the public’s understanding of financial planning and what financial planners do – where a planner’s responsibility begins and ends – is not a significant part of the reduction in disputes.
“When we get complaints around, say, the boundaries of what advisers do and don’t do, it’s usually because the adviser has not made it clear,” Maynard says.
“What has the adviser done to clarify the boundaries of what they do? I don’t think it’s about the consumer’s perspective; it’s more the adviser not being clear.”
Maynard says FOS still only receives complaints about a small fraction of the total number of pieces of advice provided in any given year. And she supports any efforts
by the profession to take the message to more people, and to explain more clearly what financial planners do.
“I think that people do need financial advice, good financial advice, and I would always support people receiving good financial advice,” Maynard says.
