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Financial complaints system has fundamental flaw: FDR

The lack of a single clearing house for complaints is a fundamental flaw in the disputes resolution system and makes spotting systematic issues impossible.

Friday, September 23rd 2011, 7:16AM 16 Comments

by Benn Bathgate

That's the view of Financial Disputes Resolution (DRS) chief Stuart Ayres.

"There's a fundamental flaw in it really as we can't measure systematic issues and we can't measure consumer satisfaction - therefore consumer confidence - which is the underpinning thing in all this," he said.

Ayres said he had made a submission to the Ministry of Consumer Affairs (MCA) but has yet to receive a reply.

"I think it's a good idea to have a central clearing area, to what extent they'll [the MCA] do it, put in place a system where they can record and monitor, is to be seen. I'm not sure they want to go that far just yet but I would strongly recommend they do, so we can record systematic issues and gauge customer satisfaction."

Ayres also acknowledged that to work, such a clearing system would require cooperation from the other disputes resolution schemes.

He also said the lack of a complaints culture in New Zealand was reflected in the attitude of companies across the board.

"We don't have a complaints type culture in New Zealand, not just in finance but any organisation, you'll find they will not promote and make customers aware they have a complaints process."

He also argued businesses could actually benefit from a more open and transparent complaints system.

"Put it on your website and all advertising material, promote it to your customers and invite feedback, ultimately this will benefit you, having your customers telling you what you can do better."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to

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Comments from our readers

On 23 September 2011 at 8:54 am Trevor Slater General Manager - FSCL said:
I agree with Stuart’s comments. It can be confusing for a consumer to know which dispute resolution scheme to contact.

The same situation existed in Australia until a central call centre was established. The call centre had a single toll free telephone number widely publicised to consumers. It covered all 10 or so dispute resolution schemes including the Government Superannuation Complaints Service (SCT). It was ‘manned’ so that when a consumer called a person answered the call, asked which financial organisation was involved and then transferred the call to the relevant dispute resolution scheme. It worked very well both from the consumer’s point of view and the dispute resolution scheme’s.

As the operator of the Financial Service Providers Register the Companies Office is in an ideal position to run such a service.

In relation to the challenge of monitoring potential systemic issues (which is part of the role of dispute resolution schemes) this could be overcome, as Stuart suggests, by all the schemes cooperating and sharing information. FSCL would certainly support such a cooperative approach to this issue.
On 23 September 2011 at 9:49 am Amused said:
Sorry Stuart, this just sounds like a pitch for customers to complain about (something) so that the DRS's can actually have work to do! Since the 1st July I'd be really interested to see the number of advisers across the country that have actually had to use their DRS to sort out a complaint from a client. Even with clients now been made fully aware of the options available to them if they have an issue with an adviser's service we have not seen the flood gates open with complaints have we? Most advisers in the industry are doing the right thing by their clients and as a consequence will never have a complaint to deal with in the first place. End of story.
On 23 September 2011 at 10:54 am w k said:
@amused: Is that what you call "job creation" or "cutting the dole queue"?
On 23 September 2011 at 11:53 am Amused said:
@ w k: ??? Seems to me employing people in a central call centre to take complaints from customers and then passing them on to the appropriate DSR is redundant. Firstly adviser's disclosure statements clearly have to spell out which DSR the adviser in question belongs to (well at least mine does) and secondly how many complaints to DSR's are actually been lodged every week at present to begin with? This just smells of an agenda been pushed here and guess who will end up paying for it in the end. Surely the fact that so few complaints have been lodged against advisers is a good sign? Well clearly not according to Stuart & Trevor and it doesn’t take a genius to figure out why...

Resourcing the FMA better than it currently is seems to be where the priority should be when talking about new jobs.
On 23 September 2011 at 12:23 pm PM said:
How long can you run a company that has nothing to do...unless you go out and create the work.My guess. There will only be one Disputes Company in 5 years time.
On 23 September 2011 at 12:46 pm Trevor Slater General Manager - FSCL said:
I would like to make just one final comment. I agree that complaint numbers against advisers have to date been low and this is good news and in my view not that unexpected. In addition to advisers 'doing the right thing by their clients', quite a few advisers have contacted us (and I am sure the other schmes as well) seeking guidance on how to deal with a particular complaint which results in a resolution without the need for FSCL to be 'formally' involved. However, please remember that the dispute resolution regime does not just apply to advisers. It covers all financial service providers ranging from insurers to small pay-day lenders to stockbrokers etc etc. I presume Amused & wk would want to know where to refer one of their clients to if they had a complaint about a not so reputable non-adviser financial service provider who has not disclosed which dispute resolution scheme he/she belongs to? By the way FSCL's and my preference is for FSCL participants to resolve complaints via their internal process and without referral to FSCL. That's why we provide resources such as complaint handling training, the internal complaint manaul and free access to guidance on complaint handling. It's better for the consumer and the financial service provider.
On 23 September 2011 at 1:18 pm DFA - Directory of Financial Advisers said:
Since when do clients go directly to a DRS when they have a complaint. The Adviser is first given the opportunity to sort out the complaint, if it can't be resolved then they can contact the Adviser's DRS...If the client does contact the DRS direct they are suppose to refer them back to the Adviser concerned. Seems simple to me.
On 23 September 2011 at 1:37 pm btw said:
Note that the name and contact details of the Scheme that each FSP belongs to is on the FSP register, so easily contactable that way. Far easier than a call centre, and a far more obvious first port of call for a disgruntled client.
On 23 September 2011 at 2:12 pm Amused said:
Well said PM. Trevor you've confirmed that complaint numbers against advisers to date have been low and let us all hope that continues to be the case. As far as FSCL is concerned would you be kind enough to share with us just how many complaints have actually needed to be referred through to your attention? As you state it is your preference to see the adviser and the client resolve a complaint via their internal process without referral to FSCL. I'm sure many advisers would be interested in knowing how many cases you have had to actually deal with since the 1st July.
On 23 September 2011 at 3:34 pm Trevor Slater General Manager FSCL said:
I am happy to provide a snapshot of FSCL statistics as of today (23 Sept). As more information becomes available and complaints are finalised it is intended to publish fuller statistics each quarter which will include information such as complaint outcomes and types.

In the meantime FSCL has received:

• 225 (apx) telephone enquiries from consumers (The majority of these have been, as correctly stated by DFA, referred back to the financial service provider as they have not been through their internal complaint process)
• 52 investigated complaints
• 8 adviser based complaints

Could I just reiterate my earlier comment that providing access to dispute resolution to the consumers that advisers deal with is currently not a great concern. The information is in the disclosure documents and most of these consumers can use the internet and look up the FSP register. The challenge is more with the less educated and lower socio-economic consumer who does not have these resources available to them and are often the victim of unscrupulous financial service providers.
On 24 September 2011 at 5:35 pm Stuart Ayres said:
I can assure readers that Mr Bathgate initiated this interview and we are not attempting to drum up business. On the contrary,as it would seem with Fscl,we actively promote Best Practice Complaints Management to avoid disputes (coming through to DRS) and enhance customer satisfaction and new business opportunities (to a something they would rather keep under the table. advisers/ financial service providers).These are practices ingrained in world class businesses (eg Toyota) but rarely in New Zealand. What a wonderful opportunity for advisers to make a valuable point of difference to financial consumers out of what many unfortunately would rather keep under the table. Internal complaints procedures and DRS are here to stay. Make the most of the resources at your DRS and convert them to $ in your business.

On 26 September 2011 at 11:35 am Amused said:
Sorry Stuart you'll pardon me if I take that last statement of yours with a grain of salt. Given the nature of how your business functions it makes sense for you to encourage as many complaints as possible. This is especially true when to date so few complaints have been received by DRS's (see Trevor's last post)

The reality is that the majority of advisers operating in the industry are and always will operate ethically when dealing with their clients hence a complaint is never going to eventuate in the first place. Whilst now a requirement of law the internal complaints procedure and DRS is for the majority of advisers just another cost (albeit small) on their businesses.

When it comes to regulation I for one am getting a little bit sick and tired of people trying to feather their own nests!

On 26 September 2011 at 1:21 pm w k said:
@amused. my apologies, i didn't phrase the question clearly. what i meant was consumers are encouraged to lodge complaints for whatever reasons so that some people don't have to be on the dole at advisors' expense.
On 26 September 2011 at 1:59 pm Amused said:
@ w k. No worries :)
On 26 September 2011 at 2:59 pm Bob said:
I'm confused if we had one scheme only that would get rid of some pretty longstanding and respected complaints schemes. The Banking Ombudsman for example.
On 26 September 2011 at 3:29 pm Bazza said:
So when the FSPR is down for three days, like it is right now, then a call centre might help....
Commenting is closed



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