The new Australian Financial Complaints Authority (AFCA) will help address public mistrust of the advice industry, says Dr June Smith, lead ombudsman for investment and advice at the Financial Ombudsman Service (FOS).
“The establishment of this single external dispute resolution body is an excellent step towards regaining and restoring trust between consumers and financial firms,” Smith says.
While the formation of AFCA pre-dates the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the timing is prescient for the government and fortunate for an industry straining to regain the good will of the community.
Smith explains that the new authority will take a smarter, much more user-friendly approach to handling complaints than its predecessors.
“It will be a simpler system to use and much easier to access,” she says. “AFCA will also engage with dispute handling in real time, so people can expect faster resolution. And that will allow financial firms not only to maintain relationships with their clients but to retain them as well.”
The speed of resolution Smith mentions should be a focal point for the authority, especially after the royal commission uncovered a litany of cases in which consumer complaints were left unattended or dragged out.
“It’ll be a faster scheme that will resolve disputes in a timely way,” Smith says. “It’s accessible to all consumers and should avoid the confusion that we often had in referring matters between schemes.
Consolidated bodies
The government announced the new complaints authority in May 2017, after the Ramsay Review revealed overlapping jurisdiction of dispute resolution schemes, inadequate compensation limits, and broader issues with the superannuation complaints processes.
As a result, three existing bodies – the Financial Ombudsman Service, the Credit and Investments Ombudsman, and the Superannuation Complaints Tribunal – will be wound up and cease to operate on November 1, 2018, when AFCA commences accepting new complaints.
A new legal entity, Australian Financial Complaints Limited, will operate FOS until AFCA takes over in November.
Membership in the new authority will be mandatory for all advisers.
“All entities that need to have external dispute resolution as part of their licence, will be required to hold membership in AFCA by no later than September21, 2018,” Smith reports.
The good news, she says, is that 98 per cent of current FOS members have already completed their latest assessment and undertaken the transition to AFCA membership.
A new mandate
Smith also explains that the new consolidated body will not only take a leading role in the dispute resolution process, but also feed information back to its members.
“A very significant role of AFCA will be to engage with industry and consumer bodies to provide insights into what’s going well within financial firms and what needs improvement,” she says.
AFCA will also continue and further develop the proactive approach FOS developed, which will include various adviser workshops and development programs. Smith says this should help “build resilience to risk and prevent consumer disputes in the first place”.
The new authority will also take on complaints from a slightly broader range of financial services consumers.
“The jurisdiction to deal with small business and primary producers has been expanded,” Smith says. “But, as with the traditional schemes, there is no expectation that business-to-business disputes be resolved by AFCA. It is about retail consumers who have received services from financial firms.”
The new body’s primary focus – improving speed of resolution – figures to be one of the main measuring sticks used to gauge improvements to the industry in the wake of the royal commission.
The authority itself will have no disciplinary powers, Smith explains, but will have the ability to refer “possible systemic issues” to the Australian Securities and Investments Commission. While FOS and the Credit and Investments Ombudsman already perform this function, AFCA will employ “enhanced reporting” to the regulator.
Smith believes the new consolidated body can only benefit advisers and the people who use them.
“The establishment of this new single body to handle all financial advice complaints for consumers is a fantastic opportunity for financial firms,” she states. “It will perform an absolutely pivotal part of the service delivery and key value propositions that financial firms have with their clients.”
