Ombudsman reveals top causes of adviser disputes

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Advisers received the fourth-highest number of FOS dispute actions last financial year. What went wrong?

According to the recently released FOS 2011-2012 Annual Review, the total number of adviser-client disputes hit 949. They were be broken down into the following categories:

 

  • Advice: 546 disputes
  • Charges: 51
  • Disclosure: 135
  • Financial difficulty: 12
  • FSP decision: 20
  • Insurance: 60
  • Non-TOR: 18
  • Privacy & confidentiality: 3
  • Service: 80
  • Transactions: 24

Managed investment disputes

The majority (58%) of managed investment disputes involved financial advisers. Of the 931 managed investment disputes that were lodged, 66% were about mixed asset funds.

“The main issues in the managed investment disputes were advice (41%), disclosure (17%) and charges (14%). The most common complaint from investors was that they had been given inappropriate advice – that is, advice that did not properly take into account or accord with their financial position, goals and tolerance of risk,” said the report.

Superannuation

Sixty per cent of superannuation disputes were between financial advisers and their customers.

When it came to product type, SMSFs accounted for 48% of the 313 superannuation disputes lodged, followed by retail funds (23%) and account-based pensions (16%).

“Disputes relating to advice (37%), service (15%) and instructions (14%) were all fairly common. The people who complained about advice were usually complaining that their financial adviser or planner had given them advice about superannuation that was inappropriate given their specific situation,” said the report.

Securities

There were 275 disputes about securities during the 2011/12 financial year, of which the vast majority (254) were about shares.

Financial advisers accounted for 37% of securities disputes, followed by securities dealers (23%) and stockbrokers (20%).

“A broad range of issues were raised in the disputes about securities. The most common complaints from investors were that financial services providers had given them inappropriate advice or misleading product information, or had not followed their instructions or an agreement,” said the report.

Real property

This asset class was only the subject of 11 disputes during the year, of which 55% were between financial advisers and their clients.

The remainder were between banks (27%) or managed investment scheme operators/fund managers (18%) and their customers.

The leading issue in these disputes was advice (45%).

Banks and insurers in the firing line

Overall, advisers received the fourth-highest number of FOS complaints at 949. The financial services providers who were the subject of the most disputes were banks (12,210), general insurers (7,591) and credit providers (2,201).

The total number of disputes increased by 19% on the previous year, which follows on from the 27% annual increase recorded in 2010/11.

When it came to disputes that made it as far as the formal FOS dispute resolution process, where a customer had not been able to resolve a dispute directly with their financial services provider, there was a rise of 24%.

FOS was quick to note, however, that there was a 31% increase in the number of accepted disputes that were resolved.

“We saw a continued increase in disputes coming to and being resolved by FOS in the last year. The composition of disputes has also changed over the last few years, with credit products and disputes lodged by people in financial difficulty making up a larger proportion of those we handled,” said chief ombudsman Shane Tregillis.

“In the last year, disputes resolved by agreement between parties rose to 74%, up from 71% in 2010-2011,” he added.

“This reflects our focus on the importance of early, co-operative resolution which includes working with applicants and financial firms to reduce the time taken to resolve disputes.

In 2011-2012, 52% of disputes were resolved within 60 days and 71% were resolved within 120 days.

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