Complaints represent a call to action for financial planners

Financial planning companies and individual planners have been the subject of severe adverse findings by Financial Ombudsman Service panelists.

When the global financial crisis first hit Australia and investment returns headed south, it was predicted in Money Management that there would be an upturn in complaints against financial planners.

Recent adjudications by the Financial Ombudsman Service (FOS) are a fulfillment of that prediction. Financial planning companies and individual planners have been the subject of severe adverse findings by FOS panelists, with the compensatory impacts nudging right up against the maximum $100,000.

Given the generally adverse publicity to which financial planners have been subjected to in recent months, it is just as well that the adjudications of the FOS are not widely published, because a number of panelists have been scathing in their assessment of how some planners have treated their clients.

However, the recent FOS adjudications should not be interpreted as providing cause for further harsh legislative or regulatory remedies.

Rather, they are proof that the existing system is working, albeit that there has been an upturn in the number of complaints.

Indeed, the upturn in the number of complaints should surprise no-one. Clients rarely find fault with their advisers when markets are rising and investment returns remain in positive territory.

While there are those who have sought to interpret precedents from some of the recent FOS adjudications, they are reaching.

At best, the recent FOS adjudications have simply reflected a proportionate exercise of the body’s powers. Nothing more, nothing less.

New ground will be broken if and when an aggrieved client decides to pursue action against a financial planner or a financial planning company in the law courts — something they are perfectly entitled to do and something which, if successful, would open the way for full compensatory damages.

While there has been much focus on ‘class actions’ with respect to the collapse of Storm Financial and the collapse of managed investment schemes, we have yet to witness the prosecution of a case in the jurisdiction offered by the state supreme courts or the Federal Court.

Dealer group heads, those running financial planning practices and individual financial planners would do well to log on to the FOS website and read the adjudications covering financial planning.

The future of the industry resides in the hands of planners themselves and how they choose to conduct themselves.