Investor outrage over the scandals aired at the royal commission into banking has triggered a dramatic 50 per cent lift in complaints from the wider public at the Australian Financial Complaints Authority.
AFCA is the new “one-stop shop” government agency that is tasked with handling complaints across all financial services, from banking to super and financial advice. The agency is the result of a merger of three former offices, including the superannuation complaints tribunal, the financial ombudsman office and the credit ombudsman.
This time last year the three former agencies combined were getting 950 complaints a week: AFCA is now getting 1450 a week. David Locke, chief executive of AFCA, says he expects the volume of investor complaints to rise again in the near future as two key developments take place.
First, new legislation that comes into effect on July 1 will allow a much wider range of historical issues to be determined. So-called legacy complaints dating back to January 1, 2008 will now come under the AFCA remit.
Industry analysts expect issues such as the controversial takeover of Bankwest by CBA and the Trio Capital affair may be re-examined under the new ruling. Internal modelling at AFCA indicates the agency should brace for another 14,000 complaints from this change.
Second, also from July the agency plans to name the firms involved in its determinations. AFCA plans to publish these determinations on an ongoing basis from October.
At present the determinations made by the authority do not name the firms involved.
The ability to have done so in the past might well have put a check on the worse repeat offenders revealed by the royal commission.
In the last fortnight, finance regulators have shown a new willingness to tackle big companies, with the Australian Prudential Regulation Authority hitting AMP with directions and licence conditions, while the Australian Securities & Investments Commission has been in court seeking civil penalties against Terry McMaster, the former head of Dover Group. (McMaster famously collapsed at the royal commission and had to be removed by ambulance — he has since made a recovery.)
As the regulators find new energy in combating bad behaviour, it is clear that investors are following in their footsteps.
Locke says the agency had planned to do nationwide roadshows to inform the wider public of its existence, but the volume of complaints clearly suggested the public is more than aware of the complaints mechanism and the roadshows have been postponed.
The biggest area for complaints made to the agency is “credit”, which would include all forms of lending as bank activities remain the biggest source of complaint, followed by insurance. Under the terms of its remit, AFCA also covers small business, though it is a minor stream of inquiry — the agency has received just 1913 complaints against financial institutions from small business and mostly in the area of misleading product and service information.
With financial advisers continually under investigation across the industry, “inappropriate advice” has emerged as a key issue in the investments category of reporting — the failure to follow instructions is the largest issue in the area.
This Friday The Australian publishes its annual list of Top 50 financial advisers in The Deal magazine. It is the third year the list has been compiled in partnership with US investment magazine Barron’s.
By James Kirby - James Kirby, The Australian's Wealth Editor, is one of Australia's most experienced financial journalists. He is a former managing editor and co-founder of Business Spectator and Eureka Report and has previously worked at the Australian Financial Review and the South China Morning Post. He is a regular commentator on radio and television, he is the author of several business biographies and has served on the Walkley Awards Advisory Board.
The Australian Business Review
17 June 2019