Ombudsman says the adviser-client relationship is instrumental in the sector's low complaint level
Complaints against financial advisers are already historically low, and with the toughening industry standards and changing regulatory regime, experts say the rate could drop even lower.
The vast majority of complaints are resolved before the reach an external dispute resolution service or the Insurance & Financial Services Ombudsman (IFSO), with a total of seven financial adviser complaints being recorded in IFSO’s 2018 annual report. According to IFSO Karen Stevens, the close knit client-adviser relationship is often crucial in bringing about a resolution in the earliest stages of a complaint.
“It’s interesting that in 75% of cases, we do not uphold them in favour of the consumer,” Stevens said.
“We’ve had financial advisers as members of our scheme since 2011, and we kept expecting an exponential rise in financial adviser complaints – and that hasn’t happened. I do believe that’s because of the special relationship that advisers have with their clients. Their clients generally don’t want to make complaints about them, and advisers are very good communicators – if an issue arises, they can talk about it and get it sorted quickly. If they didn’t have that relationship, things would be quite different.”
Consumer NZ estimates that more than 40% of mortgages are currently arranged through advisers, and that commission-based income will come under increased scrutiny in the coming years. However, Stevens says that with the correct due diligence, there should be no need for complaints to reach the IFSO.
“We also do a lot of work with our members to ensure that when they’re dealing with a client, they use the right techniques to make sure they’re fully informed about the product they’re buying, and are fully aware of their obligations,” she explained.
“If they can get it all right upfront, there should be no need for somebody to have to bring us a complaint.”
