How to Make a Financial Advice Complaint

In the wake of the Royal Commission, there are plenty of people out there who are now just realising that they may have been the victim of inappropriate financial advice.

This article is for those people, or their advisers, who consider that inappropriate advice has been provided and want to understand how to seek and obtain compensation.

First Steps

Firstly, be clear on what your complaint is about and how much is involved. This may be easier said than done.

With respect to what your complaint is about, it could come under several headings but some common ones are:

  1. Fee for no service

  2. Inappropriate investment advice

  3. Inappropriate insurance recommendations

  4. Inappropriate advice to establish a SMSF

  5. Fraud

  6. Transacting on an account without authority

There are several other potential headings for what may constitute a financial advice complaint. If you are unclear, make sure you obtain advice. Having your complaint set out thoroughly will increase your changes of successfully obtaining compensation.

Next is loss and this can be a tricky one. For example, with fee for no service the loss should be relatively evident, what fees were you charged while you were not provided service?

That said, there are numerous other headings of loss that could arise. Was there lost opportunity by failing to adjust your investments in line with your risk profile for example?

If you are uncertain of your loss you are still eligible to lodge your complaint. But if you don’t know how much you should be paid for the conduct in question it means you may short change yourself when it comes to settlement.

Internal Dispute Resolution

Once you have formed your complaint, you need to escalate it to the relevant adviser’s Australian financial services licensee (AFSL).

The AFSL will then assess the complaint under its internal dispute resolution (IDR) scheme.

The standard IDR timeframe for financial advice AFSLs is 45 days (we will talk about what happens after this at the next section).

The AFSL will investigate the complaint and propose a resolution to you. During the IDR process they may ask you for additional documents to support your complaint and will also likely obtain evidence from the adviser.

If you accept the AFSLs decision then the complaint is finalised. Often you will be asked to sign a Deed of Settlement to confirm that the complaint has been resolved.

Australian Financial Complaints Authority

If you are unhappy with the AFSLs decision then you may refer your complaint to the Australian Financial Complaints Authority (AFCA). You may also refer your complaint to AFCA if the AFSL has not responded within 45 days.

AFCA is an independent body that runs a no cost process for clients to have their complaints independently assessed.

Again, you will have to submit the details of your complaint to AFCA to enable them to assess whether you have a valid claim.

AFCA will encourage the AFSL to try and resolve the complaint but if it is not resolved then, for financial advice complaints, the process is generally as follows:

  1. Initial contact within 7 days of allocation.

  2. Further information is requested over the next 7-21 days.

  3. A conciliation may be attempted after 21 days to give both sides the opportunity for a negotiated outcome.

  4. Preliminary Assessment - anytime over 4 to 8 weeks after lodgement.

  5. Determination - Approximately 4 weeks after Preliminary Assessment.

The two most significant steps above are Preliminary Assessment and Determination. I’ll explain those better below:

  • Preliminary Assessment - This is AFCA’s initial assessment of liability for the complaint. It is voluntary for both the client and AFSL to accept. If both accept then the complaint is closed and considered resolved (though the AFSL may request a Deed of Settlement). If one or both parties do not accept it then the complaint is not resolved and it proceeds to Determination.

  • Determination - This is the final stage of AFCA and the decision will be made by either an ombudsman or a panel. This is scheduled to be only 4 weeks after the Preliminary Assessment is rejected by one or both parties but is known to take significantly longer depending on AFCA’s workload. The Determination is binding on the AFSL. If the client does not have a decision in their favour they retain the right to go to Court but they do not have any further recourse under AFCA.

There are time limits and monetary limits that apply to AFCA complaints. Anyone considering lodging a complaint to AFCA should take advice before doing so to ensure it is the most appropriate forum.

Court

In some circumstances, AFCA will not be appropriate for financial advice complaints.

For example, your complaint may also involve conduct of another party such as an accountant that has caused additional loss that cannot be considered by AFCA.

Alternatively, your loss could also be too high to be considered under AFCA’s rules.

If considering lodging a complaint via the Courts again, advice should be taken.

Unlike AFCA, there are potentially adverse costs orders at Court which could cause you additional loss.

Conclusion

The above is just a brief overview of the complaints process for financial advice.

It is important to have appropriate advice and support throughout the process as it can be time consuming and overwhelming at times.

If you believe you have grounds for a complaint, or are a financial adviser for a client who may have grounds against a prior adviser, feel free to contact us for more information.

Liam Young