AFCA opens consultation on advice-related approach document

The Australian Financial Complaints Authority (AFCA) has opened consultation on its draft approach to determining compensation in complaints involving financial advisers and managed investment schemes.

The consultation will run from 6 November to 1 December, with AFCA inviting stakeholders to provide comments or make a submission during this time.

According to the ombudsman, the approach documents help complainants and financial firms better understand how AFCA might approach some common complaint types and how it reaches decisions.

In doing so, it intends to explain its existing procedure and its principles regarding decision making, apportioning liability and awarding compensation for a loss in investment and advice complaints.

Namely, the document details AFCA’s consideration of liability and compensation concerning financial advice firms and responsible entities (REs) where the advice firm has provided advice on interests in a managed investment scheme (MIS), including a MIS that has subsequently failed or become insolvent.

This is in addition to proportionate liability statutes about complaints involving financial advisers and MISs, its powers to join a party to a complaint if the party is an AFCA member, and fairness when apportioning loss in these complaints.

“While the approach document is new, the way AFCA handles these types of complaints, and assigns appropriate liability in multi-party investment and advice complaints, is not,” AFCA said in a statement on Monday.

“Historically, this is how we have handled questions of liability when handling these complaints.”

“Formalising and publishing our approach document will support complainants and financial firms to better understand how we consider investment and advice complaints involving financial advisers and managed investment schemes and assist in efficiently and effectively resolving these disputes,” AFCA added.

Once finalised, the approach document will also be applied internally by AFCA case managers and decision makers to ensure complaints are dealt with consistently.

Last month, the ombudsman also reported that the highest number of investments and advice complaints lodged in 2022–23 concerned inappropriate advice, rising to 1,662 from 241 in the year prior.

Overall, the number of complaints concerning 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.

AFCA 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 relating to Dixon Advisory and Best Leader Markets.