by Susan Edmunds
Financial advisers represent only a very small number of external dispute resolution (EDR) scheme providers' complaints, but the schemes say their fee structures reflect that.
Joining an EDR is a requirement for listing on the Financial Service Providers Register.
Adviser Brent Sheather said, given the small number of complaints received, it should be asked why financial advisers had to "subsidise the operations of these organisations. Personally, I would rather donate money to Forest and Bird."
The Insurance and Financial Services Ombudsman (IFSO), said 98, or 3 per cent, of its 3227 inquiries in the 2017 year were about financial advisers, and nine of the 314 complaints.
FSCL's annual report shows it investigated 24 cases involving financial advisers. At Financial Disputes Resolution, 6%, or 14, of its complaints were about financial advisers.
IFSO said its 3500 financial advice-providing members contributed about 25 per cent of the scheme’s income. It has 4700 members in total.
The other two schemes did not provide a proportion calculation but said their system of splitting out complaint fees from annual fees created a user-pays environment.
Trevor Slater said financial advisers were on its lowest annual fee scale.
“The annual fee covers the cost of running the scheme on a day-to-day basis. This includes in particular responding to inquiries. When I say inquiries. I mean consumers calling us seeking help, often because they have not been able to reach their financial service provider. Our annual fees are structured in part to reflect ‘unpaid’ work,” he said.
“We receive more inquiries from consumers who have dealt with small lenders than we do from financial advisers. The minimum annual fee for a lender is $870 where our maximum fee for an adviser is $350. Likewise, a FX dealer is charged at least $870. That is reflective of the ‘unpaid’ work we do in each sector of our membership.”
He said the cost was also reduced if a group of advisers joined with a single contact point. A group of 50 advisers would pay $7500 a year, or $150 each.
"I can also say that annual fees are closely monitored to try to ensure they are reflective of the unpaid work we do and we look for ways to provide benefits of membership... I have a strong desire to provide advisers with more than just a compliance tick in the box for their annual fee."
He said all participants would pay the same amount when a complaint was lodged with the scheme.
"The bottom line is that at Financial Dispute Resolution Service, annual fee income is very much separated from complaints income and is not used to subsidise the cost of a complaint. That is, we run a ‘user pays’ model for complaints."
At FSCL, Susan Taylor said the scheme operated a similar model, with separate complaint fees.
Those made up 15 per cent of FSCL's total income.
“Scheme participants’ annual fees pay for the scheme’s general infrastructure, including our administration team and services. Generally speaking, advisers are the greatest source of administrative work - most calls, emails and changes on the membership database - for our team.”
She said advisers would also benefit from services including training and the early-assistance programmed designed to stop complaints turning into full investigations.
* An earlier version of this story incorrectly attributed Sheather's comments to Murray Weatherston,
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