FSCL told: Plan for succession, hold on to financial reserves

The latest five-yearly review of the scheme, by Sir David Carruthers, was finalised in March.

Carruthers said the scheme was generally operating well, but identified some areas where changes could be needed.

One was at the top. Taylor has been with the scheme since it started and Carruthers said she had the respect of staff and board.

“But succession planning, which has been talked about by the board for some time, has not advanced at all and it is crucial that there be such a plan in the event that she does not wish, or is not able, to continue in office.”

He said appointing a deputy was an option, or a new senior leadership model where others took on more responsibility, including support for Taylor as the scheme’s workload grew. FSCL said it accepted this and was working on succession planning.

It now has 7,800 members and its largest areas of work are consumer credit and travel insurance. Complaints about financial advisers are increasing.

Carruthers noted that some of the scheme’s members were critical of what they say are excessive financial reserves.

Its 2019 annual report noted revenue of $1.693 million and a surplus of $77,583. It had equity at the end of the year of $2.778 million.

Carruthers said he did not support the return of any of that to members, or a reduction in the level of their contribution. FSCL has reduced its participant fees in previous years.

“The resources in my view are sensible and should be safeguarded at the present time.”

FSCL said it noted that recommendation, and the healthy financial reserves were important due to the disruption of Covid.

Carruthers said there was a lack of external knowledge of the complaints schemes, which needed to be addressed.

“A co-ordinated effort across all schemes accessing those organisations and people who are likely to be in contact with vulnerable parts of the New Zealand population is an important aspect of that. Community law centres, The Salvation Army, budget advisers, and churches are an obvious source of information to such people and should be accessed in a planned and collaborative way with others. FSCL needs to develop a focused accessibility strategy effort in order to be available to vulnerable communities and part of that plan must involve collaboration with other schemes.”

FSCL said it accepted that and was working with all dispute resolution schemes and taking active steps to improve its customer outreach.

Carruthers said the scheme was not biased towards its members, though it was member funded.

“In fact, if there is a bias, it seems to me that it is in favour of the consumer rather than the funder, and I have not been troubled by any concerns about lack of independence.”

But Carruthers said FSCL should rethink its process and give parties the chance to comment on an adverse finding against them before it was confirmed.

FSCL said its practice of issuing preliminary decisions, either by way of a less formal preliminary view letter or a more detailed notice of recommendation, complies with both our terms of reference and, to our knowledge, best practice of industry ombudsman and other dispute resolution schemes.

“Under our terms of reference, we have to give 20 working days’ notice of a recommendation (and preliminary view) to both parties to the complaint. Both parties then have the opportunity to comment and to provide further evidence before a final decision (recommendation) is made. As such, we consider that both parties (scheme member and consumer) are given sufficient notice and opportunity to comment before a final decision is made.

“Adding an extra step into the process will lead to extra working days and delays in completing the investigation of a complaint or issuing a final recommendation on a complaint. However, FSCL will survey and consult with other ombudsmen and dispute resolution schemes to confirm that its current practice accords with best practice for industry ombudsmen and dispute resolution schemes.”

Comments from our readers

On 6 June 2020 at 2:57 pm finance1 said:

The lack of appeal process is a fundamental flaw in the legislation that set up these dispute resolution providers. Without an appeal process FSCL has become a law unto themselves. If they wanted to preserve their business a smart move would be to set up an independent appeal authority

On 8 June 2020 at 4:27 pm Murray Weatherston said:

If I remember correctly, the legislation doesn't allows for an appeals process for the adviser. The adviser is stuck with any ruling or determination of the Scheme. The complainant however is not so constrained as they can have recourse to the Courts if they don't like the outcome.
No it doesn't seem fair - but then life is not fair.

Re the key person risk, the same issue the reviewer raises crops up in every small business - and FSCL is a small business. There is no room to do full personnel inventory planning without crippling the organisation with double redundancy systems.
Hopefully the Board has both a required long notice period for the CEO for voluntary reirement or other exit from the company, and a decent keyman insurance policy with the CEO as the insured party for death or trauma in case God intervenes unannounced. A payout in such circumstances is of course to cover a temporary replacement until a new permanent CEO was recruited.

FSCL told: Plan for succession, hold on to financial reserves

FSCL’s chief executive Susan Taylor has been identified as the scheme’s biggest risk – and biggest strength, in an independent review.

Friday, June 5th 2020, 6:41AM 2 Comments

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