Equity and effectiveness should trump cost-savings
The Government has commissioned a timely review of the external dispute resolution (EDR) schemes covering financial services, but it should focus more on equity and effectiveness than penny-pinching.
If they have not done so already, then financial planners should be ensuring that they are fully acquainted with the terms of reference and likely outcomes of the Government's review of external dispute resolution (EDR) and complaints schemes.
The Minister for Revenue and Financial Services, Kelly O'Dwyer, released the terms of reference for the review at the same time as allowing the three-person independent panel a three-month extension allowing them to report at the end of March, 2017.
The review panel, chaired by Professor Ian Ramsay, with Alan Kirkland and Julie Abramson as members, would be examining the role, powers, governance, and accountability of the existing financial system external dispute resolution and complaints bodies: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT).
Why should financial planners and their representative organisations be paying close attention to the processes and probable findings of the review? Because financial planners have a regulatory obligation to be members of an EDR scheme and, frankly, the relationship between many planners and FOS over the past decade or so has been problematic to say the least.
What first has to be said about FOS is that it is mostly funded by the industry it sits in judgement upon and its decisions are not open to appeal to the courts.
On this basis, superannuation fund executives should also be paying close attention, in circumstances where, unlike the FOS, the SCT has operated as a Government-funded statutory authority with its decisions capable of appeal.
Both advisers and superannuation fund trustees should therefore note that the terms of reference outlined by O'Dwyer last week made direct reference to the review having regard to: efficiency; equity; complexity; transparency; accountability; comparability of outcomes; and regulatory costs.
The wording of the terms of reference, undoubtedly written by Treasury, leaves little doubt that just as the Government has been attracted to an industry-funded Australian Securities and Investments Commission (ASIC), it is equally attracted to keeping EDR services off-Budget.
A logical starting point for the panel ought to be the processes which gave rise to the current EDR regime and whether the structures remain fit for purpose.
FOS chief ombudsman, Shane Tregillis, is nothing if not a vigorous advocate for his organisation but the panel needs to not only look at the positives Tregillis seeks to espouse but the economics of running FOS, whether it is properly scaled, whether its decisions are appropriately considered and balanced and whether its funding structure fit for purpose.
Perhaps, too, the independent panel might consider whether, in the interests of equity and good risk management, FOS decisions should be open to appeal in a court of law.
It is greatly to be hoped that the review of EDR and complaints schemes pursues genuine improvement rather than short-sighted cost savings.
Recommended for you
In this episode of Relative Return Unplugged, hosts Maja Garaca Djurdjevic and Keith Ford, are joined by special guest Stephen Miller, market strategist at GSFM, to unpack the latest inflation figures and what they could mean for the RBA’s coming rate decisions.
In this episode of Relative Return Unplugged, host Maja Garaca Djurdjevic, along with Momentum Media political commentator Liam Garman and special guest Shane Oliver, chief economist at AMP, dive into the looming US election and what it means for Australia’s economy.
In this episode of Relative Return, host Maja Garaca Djurdjevic speaks with Grant Hackett, CEO of Generation Life, and Rebecca Pritchard, senior financial planner at Rising Tide Financial Services, to discuss the challenges posed by evolving superannuation and tax policies and how advisers can support clients in this shifting landscape.
In this episode of Relative Return Unplugged, hosts Maja Garaca Djurdjevic and Keith Ford, along with special guest Steve Kuper, dive into the burgeoning world of defence ETFs in Australia and take a look at what is driving this sudden emergence.
