FOS should consult before lifting fees
The Financial Ombudsman Service (FOS) should host rigorous discussions with members before it considers almost doubling its maximum fee, according to a dealer group head.
In an effort to keep up with operational costs and a growing backlog, FOS announced its intention to raise its maximum fee from $11,000 to $25,000.
It comes after the fees have remained static since 2010, despite a $1.7 million deficit in the 2012-13 financial year.
In an October consultation paper, FOS said it had undertaken a review of its fee structure and funding in order to make improvements to its service.
It said until now its increase in staff and technology investments had been funded by dispute revenue, "which is now slowing".
"While our accumulated reserves are currently sufficient to cover the shortfall, successive years of deficit are not sustainable," the paper said.
"We know we need to contain costs as best we can, and secure a revenue base that allows us to meet stakeholder needs."
In addition to the membership levy rise, the paper also proposed an increase to the user charge and dispute fees so that they are "more aligned with costs".
However, Infocus chief executive Rod Bristow said any sharp or perceived unexplained moves could result in an exodus of members.
"In an environment that has been subject to a lot of change, members need the assurance that any of these decisions are not taken lightly," he told Money Management.
Bristow said it was important every cost increase was properly justified.
"If we (at Infocus) were to put our fees up by 100 per cent, we would have to go through a lengthy consultation period to gauge what the response would be," he said.
"We're all members by choice and I think there's an expectation that any significant changes be discussed with industry partners at length."
In response to the initial proposal, the Financial Services Council suggested a capped maximum fee for groups with multiple Australian Financial Services Licensees (AFSLs).
"Irrespective, particularly given the more than doubling of the maximum membership levy, we submit that FOS should consider an upper cap on the aggregate maximum levy applied across related entities (which are also FOS Members) forming part of the same corporate group," the FSC submission to FOS said.
"FOS may wish to explore or benchmark whether there are similar fee (capped) regimes in other external dispute resolution (EDR) schemes in respect of members of the same corporate group."
Recommended for you
BT is to launch a new low-cost “Focus” investment menu for its Panorama platform this October, in partnership with Vanguard, seeking to compete with industry superannuation funds.
Net gains of financial advisers have already doubled since the start of FY25, according to this week’s Padua Wealth Data, with momentum gathering pace far faster than the previous financial year.
National advice firm MiQ Private Wealth has appointed a new chief executive to lead the business through a “transformative era” after penning a partnership deal with AZ NGA earlier this month.
WT Financial’s managing director, Keith Cullen, believes the firm’s Hubco model with Merchant Wealth Partners will be a “repeatable growth model” for the business as it scales its adviser numbers.
