AFCA sees 26% drop in investment and advice complaints
Investment and advice complaints to AFCA dropped by over a quarter in FY24, but inappropriate advice remains the most prevalent complaint afflicting the sector.
In the firm’s annual report for FY24, it said it received 3,559 complaints about investment and advice which was down 26 per cent from FY23. In the previous year, it had received 4,840 which was a rise of 50 per cent during the 12-month period driven by Dixon Advisory.
Overall sector complaints, excluding Dixon Advisory, fell to an all-time low of 2,709 complaints, which AFCA said reflected greater professionalism of the sector.
“Excluding complaints about Dixon Advisory and Superannuation Services, investment and advice complaints reached an all-time low at 2,709 complaints. This reflects the positive impact of enhanced education standards and increased professionalism within the industry, leading to fewer disputes.”
Dixon’s membership of AFCA was ceased in June 2024 which prevented any new complaints being filed against the provider.
AFCA noted that complaints may have decreased overall, but inappropriate advice remains the most complained about issue and accounted for 706 complaints. This was substantially lower than the 1,662 inappropriate advice complaints received in the previous financial year.
Other common topics included failure to act in the clients’ best interest (565), failure to follow instructions (304), service quality (298), and interpretation of product terms and conditions (223).
There was a notable improvement in complaints about failure to follow instructions which dropped from 951 in FY23 to 304.
During the year, 4,118 investment and advice complaints were closed by AFCA with an average time of 129 days, up from 106 days in FY23.
AFCA said the 4,118 cases closed were more than the total amount of complaints received during the year and related to a large backlog of Dixon complaints. There was an 82 per cent increase in closures compared to FY23.
Regarding specific products, 905 complaints were received about shares, 678 about self-managed superannuation funds (SMSFs), and 430 about mixed asset funds.
AFCA specified two recurring issues with SMSFs regarding the classification of SMSFs as wholesale products, which had different thresholds to retail ones, and the establishment of SMSFs for low balance clients.
“There is ongoing confusion in the advice space regarding the classification of SMSFs as wholesale. Some advisers incorrectly apply thresholds of $2.5 million in net assets or $250,000 income, instead of the $10 million limit specified in the Corporations Act 2001 for superannuation products. This misclassification exposes clients to unsuitable advice.
“Advice for clients with low balances to establish SMSFs continues to be a significant issue, often involving inappropriate recommendations and lack of diversification between asset classes.”
AUTHOR
Laura Dew
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