If financial advice goes wrong: complaint, AFCA, then the CSLR

Signs Moneysmart names

Moneysmart says most advisers do the right thing, and that it is important to act early if you feel unsure, pressured or confused. It lists signs of a problem, among them an adviser who:

• pushes one solution whatever your goals;
• presses you to sign documents you don’t understand;
• gives advice that doesn’t match your goals or your level of risk;
• is unclear about how they are paid or what the advice costs;
• charges for advice you never received.

If you lost money because an adviser acted illegally or gave advice that was not suitable, Moneysmart says you may get compensated.

The path, step by step

1. Step 1 · The adviser

   Raise it with the adviser

   Moneysmart’s first step is to set out your concerns to the adviser and ask how they will fix them. Where fees are the issue, it suggests asking what each one covers, and whether the adviser will reduce them.

2. Step 2 · The licensee

   A formal complaint, in writing

   The formal complaint goes to the AFS licensee that authorises the adviser. Its process is on its website or in its Financial Services Guide. This stage is called internal dispute resolution (IDR). Moneysmart suggests putting the word “complaint” in the heading or subject line, with your name, contact details and the date, a clear account of the problem and the outcome you want, and copies of relevant documents, keeping the originals and a copy of the letter.

   ASIC’s Regulatory Guide 271 sets the standards and expectations for a firm’s complaint handling:

   • ASIC expects a complaint to be acknowledged within 24 hours (or one business day) of being received, or as soon as practicable.
   • For a standard complaint, the written IDR response must come no later than 30 calendar days after the complaint is received. Most complaints about superannuation trustees have 45 calendar days.
   • The response must give the final outcome, tell you of your right to take the complaint to AFCA, and give AFCA’s contact details. If the complaint is rejected in whole or part, it must set out the reasons, address the issues you raised, and give the firm’s findings on material facts.
   • A firm can go past the deadline only in limited cases, such as a particularly complex complaint, and only if it sends a delay notice before the deadline giving the reasons, your right to go to AFCA, and AFCA’s contact details.

   Moneysmart’s page on problems with an adviser gives different figures, 14 days to acknowledge and 45 days for a final response. RG 271 makes its response deadlines enforceable (30 days, or 45 for most superannuation trustee complaints), and the 24-hour acknowledgement is what ASIC expects, so this sheet follows RG 271.

3. Step 3 · AFCA

   The Australian Financial Complaints Authority

   If you are not satisfied with how the licensee handled the complaint, you can go to AFCA, which Moneysmart describes as a “free, independent service” for complaints from consumers and small businesses about financial service providers. Its areas include investments and financial advice, superannuation, insurance, banking, and credit and loans.

   Moneysmart says an external scheme such as AFCA can help where the business did not respond within a reasonable time, where you are unhappy with how it dealt with your complaint, or where you are unhappy with its offer. Complaints can be made online, through AFCA’s website.

4. Step 4 · The CSLR

   When an AFCA award goes unpaid

   The CSLR is for a particular situation: AFCA has decided in your favour and awarded compensation, and the firm has not paid it. It says it was set up after the Hayne Royal Commission and the Ramsay Review, and is legislated to provide up to $150,000 in compensation. It is free to lodge a claim.

   The CSLR lists three conditions a claim must meet:

   • an AFCA determination about an eligible product or service that remains unpaid;
   • no entitlement to compensation under another statutory scheme;
   • a reasonable belief, formed by the CSLR, that you are unlikely to be paid in full.

What the CSLR covers, and what it does not

Those are the CSLR’s own headings; it notes that the law defines the eligible products and services, and that it must apply the law. There is no time limit on making a claim with the CSLR. When a firm is insolvent or has not paid, AFCA sends a letter called an “appropriate steps notice”, confirming it has taken all appropriate steps to have the award paid and that it has not been, and the CSLR says that letter is needed to lodge a claim. The CSLR asks people to report non-payment to AFCA as soon as possible.

Beside the main path

Reporting misconduct to ASIC

ASIC takes reports of misconduct, and its examples include an adviser giving advice without a licence and a financial service charging for services it did not provide. It is plain that it does not resolve complaints, intervene in disputes or act to get your money back, and it lists a financial complaint AFCA can deal with among the things it cannot address. Where fraud or dishonesty is suspected, such as an adviser spending a client’s money on their own expenses, Moneysmart says to contact the local police as well as reporting it to ASIC.

If the adviser is banned

A banned adviser can no longer provide financial advice. Moneysmart says the business that authorised them should contact you straight away to explain what happens to your advice arrangements; it may assign you another adviser or let you choose one, or you can end the relationship with the licensee. Bans show on the register, as sheet 03 describes.

Ending the relationship

You can end your relationship with an adviser at any time. Moneysmart’s checklist for doing it, in short:

• tell them in writing, and keep a copy;
• cancel any authorities you gave them, such as transaction authorities or account access;
• have the advice reviewed, for example by a new adviser using your Statement of Advice;
• stop ongoing fees, and ask any provider that deducts fees from your bank, investment or super account to stop.

The fees and consents that a complaint often turns on are drawn on sheet 04, fees and statements of advice, and the duties an adviser owes on sheet 02.