It should only take three months to settle a consumer dispute – at least that’s what the Australian Financial Complaints Authority (AFCA) would like – but the average case length for advice takes more than twice that.
Advisers continue to make up only 1 per cent of cases in the new financial year, a trend that follows on from the end of the 2021 financial year.
The average case length is 208 and 191 days for advice and life insurance respectively, meaning both take over half a year to resolve rather than the desired three-month timeframe. The average time for all AFCA complaints is just under four months (129 days).
AFCA lead ombudsman for investments and advice Shail Singh said a key part of the system is differentiating itself from the courts by doing things quickly.
“Ideally we want to get through things in three months,” Singh said on an AFCA webinar Thursday. “We know that’s not always the case and we have 4 per cent of disputes over 12 months old.”
The keep the process as smooth as possible for advisers, Singh recommends taking detailed file notes and don’t be afraid to turn away clients.
When it came to statements of advice (SOAs) he recommended a one-page summary with the key points and more detail being left to the full document.
“I like to see clear and short SOAs. A lot of people will not read a document longer than a page. In fact, we found most financial firms don’t even read the entire document.”
Advice has made up of 1 per cent of all complaints for the financial year so far (to 28 February), for a total of 457 with $9.2 million worth of compensation. Life insurance made up 0.3 per cent of all complaints (128 in total) for $1.1 million of compensation.
Fees and costs
Last week, AFCA released a consultation paper on its funding model which will see most of the advice sector likely having to only pay a flat fee of $376.
The user-pays model that allows five free complaints will help smaller businesses with few complaints from being burdened with supporting the authority’s budget.
“It will lie heavily with the heavy users of the system which are the banks and insurers,” Singh said. “Some of their fees will go up but most in this group will go down. We’re hoping this disincentives the settlement of matters that have little merit just because of the fee.”
The authority found advisers have felt the need to use legal representation and Singh said while anyone is entitled to do so the way the system is setup makes it unnecessary.
“People do get lawyers to represent them and complain about how much it costs. You’re not required to be legally represented and lawyers don’t always help in terms of getting these disputes resolved in a timely matter.”
