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EDRs not an easy fit for advisers

Dealing with external disputes resolution (EDR) scheme requirements has not been easy for many financial advisers, the scheme operators say.

Monday, September 8th 2014, 6:00AM 2 Comments

by Susan Edmunds

The 2008 Financial Service Providers Act requires all financial service providers to be registered and members of an EDR.

There are three EDRs that deal with financial advisers: Financial Services Complaints Ltd (FSCL), Financial Dispute Resolution (FDR), and the Insurance and Savings Ombudsman scheme (ISO).

FSCL general manager Trevor Slater said advisers were about 15% of his members, by income.

“Advisers may not be the single largest group we have but are the group I feel has been the most challenged by the disputes resolution legislation. The way legislation is set up, it’s free for consumers but members have to pay a fee to join [a scheme] and have to pay a complaint fee. For smaller operators, that can be quite a lot of money.  I empathise with advisers.”

It was something many advisers were still getting used to, he said. “Insurance companies have been [dealing with EDRs] for many years … but advisers say they’ve never had a complaint, why should they have to be part of a scheme, or pay when a complaint comes in?”

He said schemes tried to help advisers deal with complaints themselves so that they would not escalate to the point where an external mediator had to be involved.

FDR scheme director Stuart Ayres said most advisers were doing well. But there were areas where they could improve. “Most financial advisers disclose they have a complaints process and are members of a scheme but sample surveys suggest very few promote it on their websites. Is the process disclosed in the language of the consumer, how easy is it to make a complaint? How close is the information to the front page of the website? It’s an area [many advisers] need to work on.”

Ayres said advisers had been unfairly maligned and most of those who earned the sector a bad name had left the industry. “I back advisers. They understand which side the butter is and know they have to give great service to get word-of-mouth referrals. I back advisers but they could do better in making [complaint systems] accessible.”

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Comments from our readers

On 8 September 2014 at 9:51 am Dirty Harry said:
Humph. Not quite the expected ROI there chaps?

Advisers and EDRs have never been an "easy fit" because they are almost universally seen as just another unnecessary, expensive and threatening compliance cost. Antics such as "promoting" the public's "right to complain" merely prove the point.

Speaking from the majority here - those who begrudgingly pay the annual fees, get ZERO value from that, and have never had a complaint*, and probably never will.

* Complaint = an issue of the sort that involves "help" from an EDR
On 8 September 2014 at 10:03 am Murray Weatherston said:
Am I alone in my view that if the first, or one of the first questions a prospective client asked me was "please explain your complaints process", I would terminate the meeting forthwith.

The law requires us if we are a RFSP to be a member of an EDRS, and the FAA prescribes what we have to say in our Primary Disclosure Statements.

What other professions and/or businesses (absent tobacco)have to, or are expected to start a conversation with "what happens when things go wrong"

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