AFCA reports uptick in complaints against ‘inappropriate advice’

The highest number of investments and advice complaints lodged to the Australian Financial Complaints Authority (AFCA) in 2022–23 concerned inappropriate advice and rose to 1,662 from 241 in the year prior.

Next with 951 complaints was failure to follow instructions or agreements (20 per cent) and failure to act in the client’s best interests (534 or 11 per cent).

Overall, the number of complaints in relation to the investments and advice sector was up 51 per cent, with consumers making 4,840 complaints, compared with 3,207 in the previous financial year.

The complaints authority did, however, highlight that a recent downward trend in complaints related to investment and advice products would have continued in 2022–23, if not for one-off surges in complaints to AFCA relating to two firms – Dixon Advisory and Best Leader Markets.

“If the complaints against these two firms were excluded from the figures, total complaints in this category in 2022–23 would have fallen for a third successive year,” AFCA said.

Namely, excluding the complaints from the two firms, the top three issues in the investment and advice sector would have been service quality (369), failure to follow instructions or agreements (301), and failure to act in the client’s best interests (269).

Moreover, AFCA revealed that, of the total 4,840 complaints received in 2022–23, 1,696 (35 per cent) were related to self-managed superannuation funds, 757 (16 per cent) were about foreign exchange transactions, and 703 (15 per cent) were related to shares.

However, excluding complaints from the two firms, the top three products for complaints in 2022–23 would have been shares (589), superannuation funds (292), and cash management accounts (219).

AFCA revealed that overall, of the 4,840 complaints lodged, 2,257 were closed with the average time to close a complaint at 112 days.

The number of resolved complaints was, however, well below the 2,890 resolved in the year prior.

Looking at the entire financial services sector, AFCA reported that a record 96,987 complaints were lodged over the 12 months to 31 June 2023, which is an increase of 34 per cent on the previous financial year.

This was driven largely by delays in insurance claim handling, mounting financial pressures on consumers, and the ongoing scourge of serious financial crime and scams.

AFCA earlier said that a total of 1,726 complaints were lodged against Dixon Advisory, while 656 foreign exchange-related complaints were received against Best Leaders Markets. Without these outliers, the total complaints for the investments and advice space would have sat at 2,458, which would have represented a decrease in complaints of 23 per cent.

The corporate regulator cancelled the AFSL held by Dixon Advisory on 5 April 2023, with the terms obliging the firm to maintain membership of AFCA until 8 April 2024. This means it will continue to be possible to lodge a complaint with AFCA until that time.