Where to now for the Financial Ombudsman Service?
If financial planners were given a choice between the model underpinning the Superannuation Complaints Tribunal (SCT) and that underpinning the Financial Ombudsman Service (FOS), what would they choose?
The choice, broken down to its essence, would be one between a Government-funded entity established under the Superannuation (Resolution of Complaints) Act 1993 or an Australian Securities and Investments Commission (ASIC) approved external disputes resolution (EDR) body established under the requirements of the Corporations Act.
Interestingly, both FOS (as an EDR) and the SCT because of its legislative and funding antecedents, are oversighted by ASIC, but there the similarities largely end, with SCT findings capable of appeal to the Administrative Appeals Tribunal while FOS decisions cannot normally be appealed to the courts.
Every financial planner knows that their dealer group or planning firm is compelled by law to be a member of an approved EDR scheme, just as they know that they are similarly compelled to hold professional indemnity insurance. All too many planners have experience of FOS decisions influencing what they pay for professional indemnity insurance.
Weighed against these facts, it is worth noting the recent release of the findings of an independent review into the FOS which noted, amongst other things, that FOS’ organisational model had reached the end of its life and needed radical change.
While the CameronRalph Navigator review found FOS performed well on a number of fronts, it identified a high level of frustration coming from financial services providers with regard to timeliness issues, dispute backlogs and the overall lack of efficiency.
Financial planners would probably have framed many of their criticisms of FOS somewhat more doggedly than did the CameronRalph Navigator review, particularly those planners who have frequently commented to Money Management that they believe the underlying FOS methodology is weighted against planners.
It is worth noting that ASIC generally welcomed the findings of the FOS review – except with respect to timeliness – and sought to inject a positive tone in its commentary.
Perhaps that positive tone reflected the regulator’s own experience being reviewed by a Senate committee and the manner in which that process acted as a conduit for strong criticism of its own performance.
The bottom line, however, is that the findings of the Senate Committee should be gathered together with other data relating to the effectiveness or otherwise of Australia’s entire financial services regulatory structure so that it becomes a part of the forthcoming Financial Systems Review (FSR) process.
The effectiveness of ASIC and the Australian Prudential Regulation Authority must be weighed together with that of all the working parts, including the SCT, FOS and the Australian Taxation Office.
Indeed, the FSR process might consider not only whether the EDR-based FOS model is better than that of the SCT; it might consider whether ASIC is the appropriate body to have oversight.
Recommended for you
Join us for a special episode of Relative Return Unplugged as hosts Maja Garaca Djurdjevic and Keith Ford are joined by shadow financial services minister Luke Howarth to discuss the Coalition’s goals for financial advice.
In this special episode of Relative Return Unplugged, we are sharing a discussion between Momentum Media’s Steve Kuper, Major General (Ret’d) Marcus Thompson and AMP chief economist Shane Oliver on the latest economic data and what it means for Australia’s economy and national security.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford break down some of the legislation that passed during the government’s last-minute guillotine motion, including the measures to restructure the Reserve Bank into a two-board system.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford are joined by Money Management editor Laura Dew to dissect some of the submissions that industry stakeholders have made to the Senate’s Dixon Advisory inquiry.
