FAAA says advisers perceive AFCA bias
The Financial Advice Association of Australia (FAAA) has told the Australian Financial Complaints Association (AFCA) that many advisers perceive AFCA’s process as being “very much biased in favour of the consumer”.
As well, the FAAA has said that perception extends to advisers feeling that when a product fails, “advisers are often the last party standing and thus bear a disproportionate share of the cost of complaints.”.
In a submission responding to AFCA’s proposed approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes, the FAAA has made clear that AFCA should consider advisers’ negative perceptions and seek to address the issue.
Providing background to AFCA, the FAAA submission states:
“The practical reality is that a very small percentage of advisers have experienced a complaint that proceeds to AFCA. Based on AFCA matters that proceeded to a decision in the 2022/23 year, it is likely that less than 1% of financial advisers were impacted by this experience.
“Despite the very limited exposure to the AFCA complaints process, many advisers have a perception that the process is very much biased in favour of the consumer, and that when a product fails, advisers are often the last party standing and thus bear a disproportionate share of the cost of complaints. Financial advisers predominantly work in or operate small businesses, and as a result, losing a case at AFCA can have a huge financial impact on them (despite the contribution from PI insurance, given increasingly large deductible levels). Having a matter go to AFCA can also cause a great deal of stress and reputational damage, regardless of the outcome.”
“For all these reasons, it is important that documents like the draft approach provide as much context as possible and avoid the inclusion of statements that will be misunderstood. As it stands, how AFCA operates is not well understood by the advice profession, so a high level of understanding should not be assumed. It is certainly better for all stakeholders that advisers have a much better understanding of the AFCA complaints process and confidence in how AFCA operates. We have set out below, some suggested changes to improve the meaning and clarity of the draft approach to assist in achieving this outcome.”
The submission goes on to state that the AFCA discussion paper references the following matters that are not apportionable at law in relation to advice complaints:
- Failure to act in the clients best interests
- Inappropriate advice
- Failure to prioritise the client’s interests.
“As these matters make up the bulk of advice complaints, there would be very few advice complaints where the loss would be apportionable under the law. This feeds the perception that all compensation payable in an AFCA complaint will be borne by the adviser, regardless of fault by another party. It is vital that the application and scope are clear in AFCA’s approach to complaints involving financial advice and MISs,” it said.
Why are advisers subject to AFCA at all? There are plenty of other regulatory bodies for advisers. Hayne recommended a single disciplinary body for advisers, but the only one removed was TPB. At the same time another one (FSCP) was imposed. There has been no net reduction to the plethora of biased, overlapping, regulatory bodies for financial advisers, whose cumulative effect is to drive up the cost and complexity of advice for consumers.
FAAA should be lobbying for the complete removal of advisers from AFCA, just as advisers were removed from TPB. AFCA should be for product companies only.
You’ll recall the disastrous appearance of Dante De Gori at the Royal Commission where Hayne also said the FPA & AFA (now FAAA) were incapable of being any type of self governing body. He was awarded for his appearance and made head of the CFP body. The FPA lost us the opportunity of self regulation. They have a lot of work to do to make up for their mistakes.
Only in Canberra can 8 Adviser Regulatory bodies be called a “single disciplinary body”.
Red Tape Warriors of Canberra only know one thing = MORE RED TAPE !!!!!!!!!!!
A kangaroo court whereby potentially spurious claims by someone with a monetary incentive must be rebutted with documented evidence and an ability to prove something is not true which is difficult if not impossible to do at times.
Assuming the inevitable happens there us no ability to appeal, no access to courts or the AAT.
Staffed by bureaucrats who have never worked in an advice business and operate with a harry hindsight level of expertise. All funded by advisers with no risk of a malicious claim outcome to the plaintiff.
Why on earth would advisers think the system was rigged?
Yes we need something for the less than 1% of non professional ratbags.
Why is it in our “inclusive society” everyone is deserving of respect and a fair go except for advisers?
Totally agee, except for one small issue. Regulators often do have ex advisers on staff. The big problem is these people have generally come from practices/licensees at the dodgy end of the spectrum, and were scarred by the experience. They have fled from advice to regulation to “save society”. They assume that all advice practices are as dodgy as the one they worked for, and make no allowance for the huge lift in standards across the board since they left. They are motivated by revenge and self righteousness, and are oblivious to the massive irony that their excessive actions are now leading to more detriment to more consumers than anything their former employers ever did.
Talk to anyone who deal with AFCA on a regular basis, the bias isn’t perceived, its real!
The reality is a client can go to the AFCA without paying a cent, complaining about anything without any proof, and get coached how to put a compliant together by the case officer. The adviser on the other hand is assumed to be guilty, has to defend any made up claim by producing a level of proof not seen in any real court, have to spend enormous time and money in the process, and when the client is successful have no ability to appeal. This is why adviser “perceive” that AFCA is biased, because it actually is.
1% of cases but AFCA comments are the reason you spend so much time on file notes, a few extra pages in a SOA, and crossing your t’s. Dosen’t seem fair to me.
‘Advisers perceive AFCA bias’? No – reality yes.
How about this suggestion …Consumers are required to pay a “one off” administrative lodgement fee, say of $200. If the Adviser is found at fault the $200 is refunded. If not the consumer does not receive the refund of the $200. I am guessing that should stop the spurious claim lodgements which under the current no cost to consumer encourages the consumer to “have a go”.
Nope. They should be required to pay the same (or very similar) as the adviser/licencee. If AFCA has no problem demanding a non refundable fee of over $5,000 from a licencee/adviser then the client/consumer should have to do the same. In the real court system you have to pay your own way, and it stops frivolous claims, and still allows more substantive claims if the no win no fee ambulance chaser takes up the case because they think it has merit. AFCA is so heavily weighted in the client/consumers favour it is a joke.
Yep way betterer idea!
AFCA think all listed assets are risk free and that should an underlying share price decline well that’s the fault of the Adviser…AFCA don’t understand the concept of mkt risk.
They are institutional biased against FSP.
Also, I kid you not but NO WHERE on the complaint form is there a section for the complainant to tick a box acknowledging they are in fact a client or customer of the FSP they are complaining about.
You tell AFCA there is no IDR because the person making the complaint was never a client and they don’t believe you and proceed with the complaint anyway.
I once had 6 identical complaints from wholesale investors WHO were never clients and it took AFCA over 740 days to finally kick the BS complaints.
I was told by my PI insurer that I had no PI coverage because they agreed with me that no financial service was ever provided but that didn’t stop AFCA from perusing me all the way to determination. I was even threatened with legal action by the complainants lawyers because I said they were no trust worthy because they knew the clients they were representing were never clients of my FSP. AFCA didn’t care that the other side issued me a concerns letter.