AFA to Regulators – Treat Us All Fairly

The Association of Financial Advisers says it wants greater confidence that advisers will be treated fairly and consistently by ASIC and FOS.

The AFA has released the details of its submissions into the independent reviews of both the Australian Securities and Investments Commission (ASIC) and the Financial Ombudsman Service (FOS), arguing that consistent processing of complaints is essential to improve confidence in the regulatory system.

In its submission to the Senate Economics References Committee inquiry into the performance of ASIC, the AFA said it was concerned that advisers who commit criminal acts did not always feel the full force of the law.

‘To some extent there is a sense within the financial advice industry that not enough advisers, who commit criminal activity, are subject to criminal actions as opposed to administrative actions,’ the Association said.

‘We are not close enough to understand the issues in this area, however we would like to have greater confidence that a financial adviser who commits fraud or is systematically providing inappropriate advice, will be necessarily subject to appropriate proceedings in a timely manner.’

… there is a sense that not enough advisers, who commit criminal activity, are subject to criminal actions

To speed up the process through which criminal activity is identified and prosecuted, the AFA has proposed the regulator sets up a dedicated complaints channel for industry stakeholders and financial advisers.

‘Complaints from another financial adviser are typically qualified information. We would expect that this feedback would be focussed upon significant issues and systemic misbehaviour and would therefore be appropriate for ASIC to prioritise for timely investigation.’

Overall, the AFA said it was satisfied that ASIC’s current powers, which were enhanced as part of the Future of Financial Advice (FoFA) reforms, were sufficient for the oversight of the financial advice industry.

The AFA also provided a submission to the independent review of FOS, highlighting the key concerns raised by its members.

Many of the issues raised by the AFA in its submission centred on the formality and consistency of the processes FOS uses to process cases, particularly as financial service providers (FSPs) can now be required to pay compensation of up to $280,000 per claim.

‘To some extent the design of the system, around a quick and efficient claims process, is no longer appropriate, when claims can now represent such significant financial exposures,’ the AFA said in its submission.

‘It is the close linkage between the compensation arrangements and the cost of PII premiums that makes this collectively such an important issue for the financial advice industry,’ it added

In relation to process concerns, the AFA posed the following recommendations:

• FSPs should be kept regularly informed about the progress of the case, particularly over long timeframes
• Complaints or claims from consumers should be tested and not accepted without question or investigation, particularly when the compensation sought is at the higher end of the scale
• Staff should all receive the same level of training, and deliver a consistent service to both consumer and FSP
• Case managers should follow a consistent process when investigating and ruling on a case

There is a reduced level of confidence in the system

‘There is a reduced level of confidence in the system,’ the Association said. ‘We have received feedback from some of our members that there is enough doubt about the process that they will sometimes settle cases that they would firmly expect that they should win.’

The AFA also called on the Ombudsman to examine ways in which claims could be processed more efficiently.

‘Cases staying open for an extended period of time has significant implications for FSPs, including additional costs and complications for PI insurance (including increased premiums).’

Submissions for both inquiries are now closed.