AFCA adopts early merit assessment of complaints
Early merit assessments of complaints are now a permanent feature of the Australian Financial Complaints Authority’s (AFCA) process following a pilot program.
AFCA said its pilot program showed the early identification and exclusion of unmeritorious complaints - those where there was clearly no error or financial loss - made complaints handling faster, cheaper and fairer for all parties.
The process was tested in a three-month pilot last year which found the time taken to resolve the selected cases was half that of comparable cases, and the fee charged was as much as 75% lower.
Further analysis of the pilot has resulted in the decision to adopt merit assessment as a permanent feature, to be applied to types of complaint where the pilot showed it worked well and fairly.
AFCA chief operating officer, Justin Untersteiner, said: “Our pilot was in direct response to feedback from members that the cost of paying for some determinations – the final, formal decision-making stage of our process – can outweigh the value of the initial service or product that was provided.
“Firms told us this meant they sometimes made a commercial decision to concede the complaint on the basis of cost, regardless of the merits of the case.”
Untersteiner said the issue was made worse by the conduct of a small number of third-party paid representatives using questionable tactics, with complainants refusing to consider a reasonable resolution in the earlier stages of AFCA’s process.
Merit assessment would be applied in cases where sufficient information about a complaint was available at an early stage, and it clearly showed there was no error and/or loss. Complaints that raised more complex issues, with significant documentation involved, would still require an investigation to reach a view on what had most likely occurred, AFCA said.
“The balancing act is to ensure we are not closing complaints that do have merit. Sometimes the only way to determine this is through further investigation,” Untersteiner said.
AFCA said the merit assessment was a key part of its response to Recommendations 4 and 7 of the Independent Review of AFCA, by addressing poor conduct by some paid advocates and ensuring its funding model did not deter firms from defending complaints.
Responding to the news, Financial Services Council chief executive, Blake Briggs, said: “Ensuring AFCA’s processes are fair to all parties by incorporating practices to identify complaints without merit quickly is a positive step”.
AUTHOR
Liam Cormican
Recommended for you
Insignia Financial has issued a statement to the ASX regarding a potential bid from a third global private equity business to acquire the firm.
More than 30 advisers fell off the FAR during the Christmas and New Year period, according to Wealth Data, with half of these coming from licensee giant Entireti.
With next-generation heirs unlikely to retain their family’s financial advisers after receiving an inheritance, Capgemini has explored how firms can work with younger generations to maintain a relationship.
The use of technology and data analytics will be a way for advice firms to grow in 2025, according to Adviser Ratings, with those who are using it successfully reporting 10 per cent higher profit margins.
