Advice complaints on the decline but ‘getting more complex’: AFCA
Monthly advice complaints are on the decline, but figures could rise again by opening the scope of advice to other providers, according to the Australian Financial Complaints Authority (AFCA).
Speaking at the 2023 United Association Roadshow, AFCA lead ombudsman for investments and advice, Shail Singh, observed that disputes were “getting more complex than they used to be”.
“In the financial advice area, we’re going well. It’s gone from 47 to 45 [complaints] a month; that’s not many, about 500 to 600 a year,” he said.
“Of those, in trying to simplify it — there’s essentially systemic problems. Self-managed super fund continues to be a big theme. For other disputes, they’re getting more complex than they used to be.
“Risk is another one [where] over-insurance or underinsurance is an issue, but I won’t overstate it because the numbers are low overall.”
While consumers typically struggled to understand the difference between personal and general advice, Singh said disputes could rise by opening up the arena to non-relevant providers, as recommended in the Quality of Advice Review (QAR).
“It will probably increase the number of potential disputes because the definition of personal advice is broader and then it will be a question of interpreting what ‘good advice’ means by a non-relevant provider,” he observed.
“There are risks in leaving it to industry to determine whether a non-relevant provider or a relevant provider should provide the advice because things that look on their surface quite simple could have very severe consequences for consumers.”
He also shared his thoughts on how the removal of advice documents, another recommendation in the QAR, could impact how AFCA reviewed complaints.
“Advice documents are important, but sometimes, if you get a 120-page version of the statement of advice, it can be very hard to understand what the advice was,” Singh explained.
“Records of advice, not in the legislative sense but as some sort of record of what was stated, is important and will continue to be important. We also have regard to all the other material on file, like file notes and other records of what happened, to get an understanding of it.”
Singh said it would be “interesting” to see how the advice profession would respond to the proposal if it was put into legislation.
“Ultimately, if a dispute goes to AFCA, we’re going to have to understand what was said to the consumer and what they understood of that particular advice,” he stated.
Fellow panellist Conrad Travers, director and principal consultant of Tangelo Consulting, believed it was important in all this to make the actual advice the hero.
He said: “We need to balance out the efficiency you’re going to get with making sure the advice is actually clearly provided to the client. I would recommend new clients, even if they don’t ask for it, give them a simple summary of the advice.
“It could be just five pages, [but] make the advice really clear — what are you recommending? Why are you recommending it? What are the next steps for the client?”
He agreed with Singh that the client file was just as important as an actual advice document.
“You’re probably sick of hearing of compliance about the file notes, but it’s going to become even more important.
“Licensees will need to provide guardrails to advisers to explain to them how to get this win while protecting themselves but also treating the client with respect with a nice, simple summary of the advice,” he said.
AUTHOR
Rhea Nath
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