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ASIC says the average top 20 AFSL gets about 5 significant complaints a year: see figure 8 in paragraph 84 of ASIC Report 251 Review of financial advice industry practice

Dover is now well and truly in the top 20 AFSLs. But Dover has nowhere near this number of significant complaints. Nowhere near it.

Over the last ten years Dover has averaged one significant FOS complaint every two years. This is a remarkably below average significant complaint rate.

Three of those five significant complaints were resolved in the adviser’s favor, at FOS. But Dover had to fight FOS every step of the way. FOS is an aggressive consumer advocate, not an independent dispute resolution process. FOS’s dice is loaded against the adviser. It’s what ASIC should call institutional bias.

FOS says it’s not bound by the law, the rules of evidence, industry practice, the contract between the parties or even its own prior decisions. I am not aware of FOS ignoring the law, the evidence, industry practice, the contract of its prior decisions to find in favour of the adviser…that will never happen. These are special rules to help clients. FOS does not use these rules against clients. FOS does use these rules against advisers. 

This is where the dice is loaded: lots of special rules favoring the client making fairness and equity impossible. These are in the contract with the AFSL. There is nothing an AFSL can do about it: its a take it or leave it contract, and an AFSL must have an EDR. Its a term of every licence.

Neither FOS or the client is bound by FOS’s decision. Just the AFSL…. And, of course, you, the adviser. Think about that for a moment. You are bound by FOS’s decision. But no one else is. The client is free to go to the courts and FOS is free to do whatever it wants. But you, and only you, are bound by FOS’s decision.

Advisers have to pay for this. Not the client.

FOS has a conflicted fee structure: FOS makes money if it escalates a complaint from the adviser’s internal dispute resolution process to FOS’s external dispute resolution Reccomendation team; and FOS makes more money if the complaint goes past the Reccomendation team to FOS’s Determination team.

FOS is a not for profit, but it still needs money. Executive promotions depend on it.

FOS wins financially if the dispute lasts long, so don’t expect early mediation or quick collegiate cooperation to decide a matter quickly. The process takes longer and costs more than you expect.

Do expect systemic distrust, disapproval and discord. FOS likes a fight. The bigger the fight the bigger its fee. FOS gives advisers hard times.

FOS is unique in that inexperienced and unqualified non-professional employees form opinions on what experienced and qualified professionals should have done. With the benefits of plenty of time and hindsight. Could you imagine the outcry if this happened in other professions? Say doctors, or architects? Sure, the FOS junior may have a law degree. So what? How does a law degree equip you to judge what a qualified financial planner’s standard of care should be?

Law degrees do not include training in medicine, architecture or financial planning. 

You would expect FOS to be leading the way here, with a team of university qualified financial planners boasting years of relevant and practical experience in financial planning. Hard earned hands on real world experience. Recognized expert practitioners in their field, financial planning. But FOS is not leading the way. No one at FOS fills these boots or fits this bill.

These inexperienced FOS staff can award damages of up to $309,000. That is getting close to the sort of damages awarded by Supreme Court judges. But Supreme Court judges are bound by the law, the rules of evidence, the contract and their prior decisions. They just can’t do what they like. And their decisions are subject to appeal….

The courts say FOS is not a judicial body. Its an administrative body. Yet FOS is not subject to the Freedom of Information regime. There is no way to shine a light on its internal processes. Like what was the real reason FOS decided for the client? Why did FOS not require the client to produce the evidence everyone else thought was relevant?

FOS says the six year statute of limitations starts when the client first reasonably became aware of the possible complaint. We handled one complaint for a client in March 2016 that harked back to 2004. That’s 12 years… The stature of limitations is intended to create closure, to give finality to commercial matters. No other profession faces a virtually uncapped time exposure like this. Its unique to financial planning.

FOS’s terms of reference have to be approved by ASIC. ASIC controls FOS via Regulatory Guide 139, dealing with the Approval and Oversight of External Dispute Resolution Schemes. FOS is required to report all sorts of activities to ASIC. FOS is not independent of ASIC, not by a long shot. 

Yes. FOS is scary.

Don’t assume FOS is a moral organization, dedicated to always doing the right thing. One recent case disclosed a serious long term fraud by the client. Go to gaol stuff. Dover asked FOS to report the fraud. FOS refused, glibly e-mailing it reported fraud by advisers but did not report fraud by clients.

I assure you this happened: I hope you are as shocked as I was. Can you imagine the outcry if an AFSL refused to report a crime?

Dover reported the client fraud. It was the right thing to do. 

Section 912A of the Corporations Act requires Dover to do everything necessary to run an efficient and effective AFSL. This includes meeting general community standards of moral conduct. ‘Doing the right thing” is part of the privilege of an Australian Financial Services License.