EDRs want advisers to spread word

A new report from the Ministry of Business, Innovation and Employment’s Consumer Protection has looked at New Zealanders’ understanding of consumer rights, the problems they encounter with industry sectors and how well they resolve them.

It found mixed results, with strong awareness of some aspects of consumer law and big gaps in others.

The report found awareness of external disputes resolution services was relatively high in general, but those that deal with financial advisers were not as well known. Clients were reluctant to use them.

While 80% had heard of the Disputes Tribunal, and more than half knew of the Banking Ombudsman, only 31% had heard of the Insurance and Financial Services Ombudsman, 15% knew of about Financial Disputes Resolution Service and 13% were aware of FSCL. Another 13% did not know of any.

One in ten banking and financial services customers said they had had a problem in the past two years, of whom 74% took action. Just over 40% said it was resolved to their satisfaction.

The biggest cause of problems was cost, followed by incorrect or misleading information.

In insurance, 10% of customers had had a problem but only 63% took action and 35% said it was resolved to their satisfaction.

Of all consumers who took action to resolve their problem, only 5% said they went to a dispute resolution service at any point during the process, and only 1% said their problem was resolved through one. In addition, a further 23% of those who had taken action failed to find a resolution through the business, yet still did not approach a dispute resolution service.

FSCL chief executive Susan Taylor said the results were disappointing but not surprising.

“Our experience shows that consumers only really want to know about dispute resolution services at the time a complaint arises as opposed to when the advice or service was supplied.

“The lack of consumer awareness makes it important that all financial service providers, including advisers, tell their customers about their external dispute resolution scheme at the time a complaint is made. I note that it will soon be mandatory for financial advisers to do this.

“FSCL encourages all our scheme participants to have information available about us on their client-facing information, including websites, and to tell their clients they can refer unresolved complaints to us.”

She said the Government could also do more to educate consumers about the dispute resolution services available and to promote the use of the schemes to consumers.

Karen Stevens, at IFSO, said the report pointed to growing confusion among consumers about where to go if things went wrong.

"Free and independent dispute resolution schemes, like the IFSO Scheme, are essential for improving consumer confidence and ensuring access to justice.

"We can all do more to raise awareness. All financial advisers are required to tell their clients in writing about their own complaints process and about the dispute resolution scheme they belong to. It’s in your interest to make it clear to clients, as early as possible, that they have free access to our service for inquiries or unresolved complaints."

Comments from our readers

On 29 May 2019 at 11:36 am gavin austin adviser business compliance said:

Sue -" note that it will soon be mandatory for financial advisers to do this" - I stand to be corrected but my understanding of the current AFA code standard 11 that this is already mandatory but the new code of conduct for ALL advisers doesn't. The current disclosure regs for RFAs requires disclosure about complaints etc. So it must be included in the NEW Act which won't come into effect for another 9 months according to MBIE. There will be regulations but nothing final as yet unless I've missed something.

On 30 May 2019 at 8:21 am Mr Slater said:

Gavin you are correct. Complaint requirements has not been included in the new Code. The current obligation to have a compliant internal and external complaint handling processes arises from the contractual obligations of dispute resolution scheme membership, as covered by scheme rules. Whilst consumer awareness is important, as important is for advisers to have a good internal complaint process and an understanding of complaint resolution skills and the value of a complaints register. If advisers have good internal process then it is unlikely they will need the services of an EDR. Adviser education in complaint processes and skills is an area EDR schemes can help in along with education providers. FDRS provide all that advisers need to minimise complaint escalation, as I am sure FSCL, IFSO and the BOM do.

On 30 May 2019 at 11:00 am Murray Weatherston said:

My understanding from an enquiry to FMA is that having complaints handling processes and procedures will be a standard condition of a FAP licence.

On 30 May 2019 at 11:48 am gavin austin adviser business compliance said:

Thanks Murray. Trevor I agree with all that you've said - my concern was that the wrong impression was being conveyed.

In the few cases I've seen regarding complaints the way the adviser has handled the situation is to immediately inform the client about how the process works and that an independent free disputes resolution was available. I can't think of anything else advisers are supposed to be doing.

EDRs want advisers to spread word

Advisers are being told they need to help their clients better understand the processes available to help them when problems arise.

Wednesday, May 29th 2019, 6:00AM 4 Comments

Comments from our readers

www.GoodReturns.co.nz