The financial advice industry has been commended by AFCA for “fantastic” overall standards, with only a slim percentage of complaints resulting in a decision against an adviser and most complaints being resolved at an early stage.

Data out of the Australian Financial Complaints Authority’s office shows complaints relating to inappropriate advice or advice that isn’t in their best interests – collectively called ‘Know Your Client’ issues – make up a quarter of all ‘Investment and Advice’ complaints, yet most are resolved by agreement or don’t go any further.

Since its inception three years ago, 2,788 of the 11,355 Investment and Advice complaints AFCA received were were categorised as Know Your Client issues. Of the 2,252 KYC cases that have been closed to this point, only 333 (or 14.8 per cent) resulted in a decision against a financial adviser.

Forty per cent were resolved by agreement at an early stage, while 24 per cent of cases fell outside of AFCA’s purview and went no further.

Put in a broader context, only 3 per cent of all Investment and Advice complaints resulted in a decision against a financial adviser for a KYC issue.

“It’s a good result and it reflects the true position,” Shail Singh, AFCA’s senior ombudsman for investments and advice tells Professional Planner. “Most advisers are doing a really good job, the level of sophistication in terms of risk and KYC and the standards being employed are fantastic.”

According to AFCA lead ombudsman for investments and advice, Natalie Cameron, adviser-at-fault complaints are remarkably uncommon.

“The average adviser has little chance of ever having an AFCA decision against them,” she says.

Tailored to fit

AFCA first refers complaints back to the financial firm to see if it can resolve the issue, then works with both parties to help reach an agreement through negotiation and conciliation if required. If the case is still ongoing, AFCA will provide a preliminary determination before ultimately making a binding decision.

“Most cases are dealt with early and by mutual agreement,” Singh explains. “If someone complains to us we always give the financial firms the chance to resolve it directly with the complainant.

“Even after the registration referral period we tend to encourage resolution by mutual agreement and conciliation before we go through to a decision – that’s the main aim of the dispute resolution process.”

After trawling through thousands of advice cases, Singh says one of the key takeaways for advisers is the benefit of documents that are tailored to a client’s financial literacy.

“It’s difficult for us to be convinced an adviser has selected the right strategies and financial products for a client, or even if they have, that they have adequately conveyed this to a client if documents contain pro forma jargon, complex concepts or excessive amounts of irrelevant material,” he says.


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