Jayson Forrest is the managing editor of Money & Life Magazine.
AFCA is preparing to receive complaints about the conduct of financial planning practices dating back to 1 January 2008.
In the first seven months of operations since replacing three pre-existing external dispute resolution schemes, the Australian Financial Complaints Authority (AFCA) has received a total of 41,528 complaints, with the investments and advice sector receiving 1,984 of these complaints.
And that figure may increase, with consumers and small business able to lodge backdated complaints to AFCA that would normally fall outside its six year jurisdiction. For a 12-month period, AFCA will accept complaints about the conduct of financial firms dating back to 1 January 2008.
Speaking recently at an FPA Sydney Chapter event, Shail Singh – an ombudsman at AFCA – provided planners with details concerning AFCA’s activities, including dealing with legacy complaints.
According to Singh, when reviewing legacy complaints, AFCA’s process begins with it referring complaints back to financial firms to resolve.
“It is our expectation that firms will engage proactively with their clients and customers to resolve these legacy matters themselves where possible, as part of their commitment to justly remediate the misconduct of the past and meet the community’s expectations of fairness,” Singh said.
However, where firms are unable to satisfactorily resolve the complaints, AFCA will start investigating these legacy cases from 1 October 2019.
“It should be noted that if a complaint has already been decided, AFCA can’t reopen it. We look at new complaints lodged with us,” Singh said.
Seven year requirement
Singh conceded that an area of difficulty that was likely to arise with legacy complaints was the existing requirement that businesses only keep their records for seven years.
“We expect there will be issues for firms if they don’t have relevant records available when dealing with complaints that go beyond the seven year period,” Singh said.
“AFCA will not discount any case because there are no records available. In instances where there are no records to refer back to, we will rely on client and planner recollection, as well as any supporting evidence.”
Singh added that AFCA would also be mindful of the regulatory and professional environment at the time the incidence happened, to ensure the business and/or planner was compliant with the existing code of conduct, code of ethics, professional standards and regulatory requirements at the time.
“We understand that legislation and professional codes of conduct change over time, so AFCA will be basing its determinations on the prevailing regulation and codes at the time of the incident.”
Top 10 tips
According to Singh, the majority of issues facing financial planning firms when defending a complaint is the lack of written and clearly documented file notes kept by the business to support their position. To help planners better avoid a complaint arising in the first instance, he offered the following 10 tips:
Take detailed file notes.
Ensure the client advice details clear goals and a clear strategy. Avoid opaqueness in detail which can be misinterpreted.
Turn clients away when they are inappropriate for the business or the type of advice you can offer them.
Clearly explain the risks involved, as part of any planning strategy.
Explain what type of services you are providing for clients.
Use templates carefully, particularly with SOAs.
Use risk profiling tools carefully.
When it comes to super switching and SMSFs, planners must ensure they have good reasons to switch super and to recommend an SMSF. Planners need to clearly articulate the alternatives available to their clients.
Understand and explain products to clients. Don’t just cut and paste from the PDS.
Be clear about the advice relationship you have with clients you know well. It’s essential that you treat any person as you would another client, which includes declaring and conflicts of interest.
The FPA has created new tools to help members build superior long-lasting relationships with their clients including:
Delivering Excellence booklet
Financial Planning dashboard to track client goals