2007 fics annual review - Financial Ombudsman Service · 2008-10-13 · sits on the fics website at...

2007 f ic s annual reviewfinancial industry complaints service limited

statement from the chief executive 2

fics snapshot 3

highlights at fics for 2007 4

how fics resolved complaints in 2007 5

the fics board of directors 6

responsibilities of the board 9

major board initiatives in 2007 10

chair of the board report 11

chief executive report 13

panel chair report 16

the fics panel 19

case management and conciliation report 20

other activities 23

fics in south africa 24

conferences & seminar presentations 25

media 26

monetary limits 29

westpoint update 31

systemic issues/serious misconduct 32

2007 fics annual conference highlights 34

what do complainants really want? 35

guiding principles of as iso 10 002 36

as iso 10 002 case study 37

a strategic approach to complaints handling 39

cases in 2007 41

complaints resolved by case management 42

complaints resolved by conciliation conference 44

complaints resolved by the panel/adjudicator 47

statistics for 2007 53

the fics team 71

contacting fics back cover

statement from alison maynardfics chief executive

2

contents

It is with much pleasure and in accordance with the Rules of the Financial Industry

Complaints Service Limited (fics) that on behalf of the fics Board, management and

staff, I present the Annual Review for the period ending 31 December 2007.

This year’s review features reports from the Chair of the Board, the National Panel Chair,

the Conciliation Manager and myself. In addition there are some selected presentation

highlights from the fics 2007 Conference, a section looking at the increase in the

monetary limits and an update on complaints relating to the Westpoint collapse.

Finally, we outline some interesting case studies and important complaint statistics.

This year we have again focussed on producing a more cost-effective annual review that

sits on the fics website at www.fics.asn.au. If you wish to have a hard copy sent to you,

or you have some feedback on this report, please contact Troy Hunter, Communications

Manager, on (03) 8623 2000 or [email protected]

I hope you find the 2007 Annual Review an interesting read.

Alison Maynard, Chief Executive

3

what is fics?

fics is an external dispute resolution (edr) scheme.

fics is an alternative to the courts and provides resolution of complaints against the

criteria of the relevant law, good industry practice, relevant industry codes and what is

fair in all circumstances.

The Australian Securities and Investments Commission (asic) issues Australian Financial

Services Licences (afsls) to providers of financial services. It is a condition of an afsl

that the licence holder must be a member of an approved edr scheme, such as fics, if it is

dealing with retail clients.

fics is a national service that is free to consumers.

fics members

fics Members provide a wide range of products and services to consumers, so they are

classified by different categories of membership. Further details of the different fics

membership categories can be found in the fics Constitution at www.fics.asn.au

category of membership31 december

200731 december

2006

category a life insurance and large friendly societies

39 39

category breinsurers

5 5

category c managed investments

371 353

category dpooled superannuation

11 11

category e brokers, financial & security advisers

174 168

category f – a, c or e small members – non–voting

2,139 2,069

total members 2,739 2,645

fics snapshot mission statement

“Providing an independent service

resolving disputes between Members and

Consumers fairly and efficiently”.

4

Membership of fics rose to 2,739 by 31 December 2007 (2,645 for 2006)

1,127 new complaints received (1,375 in 2006) Y see page 55 (and pie chart left)

1,214 complaints finalised (1,307 in 2006) Y see page 56

2,382 (90%) fics Members had no complaints lodged against them in 2007

82 further written Westpoint complaints (328 in 2006) Y see page 31

Over $1 million in total paid out to Westpoint complainants by end 2007 Y see page 31

fics, the Banking and Financial Services Ombudsman and the Insurance Ombudsman Service announce merger on 30 August 2007. New organisation will be called the Financial Ombudsman Service. Merger date to be 1 July 2008 Y see page 11

The fics monetary limits were increased, with effect from 1 July 2008 Y see page 11

fics holds 4th Annual Conference Y see page 34

4 x idr training workshops were held by fics around Australia Y see page 23

fics releases Complaints Manual for Members Y see page 23

highlights at fics for 2007

new complaints by industry

2007 %

life insurance 388 34

financial planning 336 30

stockbroking 165 15

managed investments 120 11

complaints against non-fics members 100 9

other 18 1

total 1,127 100

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{ initial assessment } consumer

Contact fics by telephone 7, 501 calls

complaint file created

Written complaint received from complainant 1,127 written complaints

578 complaints not forwarded to member

enquiries officer

Establishes if complaint is within fics Rules and obtains required information from complainant

conciliation manager

Confirms complaint is within fics Rules

{ case management/conciliation } case manager or conciliator

Complaint investigatedFormal Conciliation Conference conducted

Other resolution methods used

440 complaints resolved by case management, including 62 resolved

via conciliation conference

not resolved resolved

Case summary prepared by Case Manager

Case finalised

{ arbitration } panel case manager

Identifies and confirms remaining issues in disputeFurther investigates and prepares file for Panel/Adjudicator

panel or adjudicator

Examines evidence and determines case 128 resolved by panel

68 resolved by adjudicator

formal determination

Case finalised 1,214 total complaints finalised in 2007

5

how fics resolved complaints in 2007

6

peter e. daly am

chair

Peter was appointed Director in December

1993 and Chair in January 1997.

Peter came to Australia in 1980 from South

Africa and was appointed the Chief Executive

and Managing Director of Norwich Winterthur

Group in 1983. He has held a number

of directorships since then and was the

President of the Insurance Council of Australia

Limited from 1986-1987 and Chief Executive

Officer from 1991-1997. He has served as the

Deputy Chairman of the Zoological Parks and

Gardens Board and is the Chair of Insurance

Ombudsman Service Limited. On 14 March

2004, Peter was awarded the Order of

Australia for services to the insurance industry

and to the community, particularly through the

advancement of alternative dispute resolution

and consumer protection.

dominic alafaci

CPA, CFP®, FFPA, B.Ec, B.Bus (Acc)

Dominic was appointed Director in March

2004, representing industry participants.

Dominic was a member of the Australian

Society of Investment and Financial Advisors,

which developed today’s Financial Planning

Association (fpa). He is a former Director of

the fpa. He has also sat on the fpa’s Audit

Committee, the State Council and other fpa

committees since its inception. Dominic has

held senior roles as a practitioner for Bain &

Company, Deutsche Bank, and has served

as the Financial Planning Manager for the

HongKong and Shanghai Banking Corporation

(hsbc), is the Managing Director of Collins

House Financial Services Pty Ltd, and more

recently was appointed a Principal of

Lachlan Partners.

john berrill

BA, LLB

John was appointed Director in August 2005

as a consumer representative.

John was a consumer representative on the

fics Panel from 1995-2001 and again from

2003 until August 2005. John is an insurance

and superannuation lawyer and is a partner

with Maurice Blackburn a labour law firm. He

is an accredited Personal Injuries Specialist

and a member of the Law Institute of Victoria,

the Australian Lawyers’ Alliance and the

Australian Insurance Law Association. John

has been involved in the consumer movement

in advice, policy and advocacy work for many

years. He is also a member of the Consumers’

Federation of Australia, the Chronic Illness

Alliance and the Superannuation Complaints

Tribunal Liaison Committee.

the fics board of directors at 31 december 2007the fics board oversees and monitors the activities of fics and ensures the dispute resolution process is independent.

peter e. daly am

chair

dominic alafaci

john berrill

7

winsome hall

david w. lidbetter

russell mckimm

winsome hall

BA

Winsome was appointed Director in April

2006 as a consumer representative.

Winsome was previously a consumer

representative on the fics Panel from

December 2004. She is a company director

and Trustee of the Australian Reward

Investment Alliance (ARIA) as a member

representative nominated by the Australian

Council of Trade Unions; a director of

State Superannuation Financial Services; a

director of Colonial First State Private

Capital Limited; and a director of Uniseed

(UIIT Pty Ltd) as a nominee of Westscheme

superannuation fund. Winsome also provides

advice to the Association of Superannuation

Funds Australia (ASFA) on superannuation

industry best practice guidelines and is a

member of Choice (ACA). She was previ-

ously a Director responsible for economic

and social policy advice in the Department

of the Prime Minister and Cabinet, and was

Secretary of the ACT Branch of the union for

commonwealth public servants (CPSU) from

1989-1993.

david w. lidbetter

B.Sc, Dip.Scc Inst.

David was appointed Director in November


In 1975 David was appointed Managing

Director for Berger Paints Australia, a position

held until 1980. Then he was appointed

Supervising Director and Chief Executive of

the parent group Berger Jenson & Nicholson,

which was responsible for operating

companies worldwide. In 1986 he retired to

pursue his private interests. He has played

a part in community work and in 1986 was

appointed as Community Representative on

the Sydney Airport Community Forum and

various airport committees.

russell mckimm

Dip FP, SF Fin, MSDIA, FAICD, ADA1 (ASX)

Russell was appointed Director in

August 2005.

Russell has over thirty years experience in

the stockbroking industry and is currently a

consultant with Tolhurst Ltd. Before that, he

was a Director of Shaw Stockbroking, in

charge of their Melbourne office. Previous

positions include Director for Tolhurst Noall

Ltd (now Tolhurst Ltd) from 2001–2005

and Managing Director of Ord Minnett Ltd

from 1988–1991. He holds a Diploma of

Financial Planning from Deakin University

and has studied at the Securities Institute of

Australia where he was also a regular lecturer

in their Certificate and Graduate Diploma

courses before leaving Sydney. Russell is

a past President of the Financial Planning

Association (fpa) and a former Board member

of the fpa Complaints Resolution scheme and

is a current Panel member for asx National

Adjudicatory Tribunal and astc Disciplinary

Tribunal. He is also a board member of the

Stockbrokers Industry Association (sdia).

8

jenni mack

jim simpson

david w. squire

jenni mack

BA, MALP (Admin Law and Policy)

Jenni was appointed Director in November


Jenni has extensive consumer affairs and

complaints handling experience. She is the

Chair of the consumer watchdog Choice

and is a former executive director of the

Consumers’ Federation of Australia, the peak

consumer body. She was the deputy legal

services Commissioner in NSW responsible

for handling complaints about lawyers in the

mid ‘90s. She has represented the community

on the NSW Judicial Commission (which

amongst other things deals with complaints

about judicial officers), and was a member of

the Migration Agents’ Registration Authority’s

complaints panel for six years. She is also a

director of Insurance Brokers Disputes Ltd.

jim simpson

B.Arts (Psyc/Eco), Dip.Fin.Planning, Dip.Aust.Insurance

Jim was appointed Director in November

2006.

Jim is currently the National Manager,

Guardian Financial Planning and was

previously the National Manager of

Professional Standards at Asteron. Prior to

his time at Asteron, Jim held two National

Compliance Manager roles at Westpac during

1997-2003. Earlier roles also included Sales

Training Manager at Westpac and several HR

management roles at AMP.

david w. squire

Dip AII, GMQ (UNSW), QPIB, AACI

David was appointed Director in August 2002

representing industry participants.

David is the National Industry Liaison

Manager for MLC. He has over forty years

experience in general banking, life and

general insurance and financial planning in

a variety of roles including compliance and

regulatory policy. David has been actively

involved in industry advocacy dating back

to 1982 and is a director of the National

Insurance Brokers Association and former

director of the Australasian Compliance

Institute, as well as being a member of the

Investment and Financial Services Association

(ifsa) Regulatory Affairs Board committee.

Additionally he chairs a number of active

committees at the aforementioned bodies

and is the former chair of fpa Regulations

Committee and a member of Treasury’s FSRA

Implementation Consultative Committee.

9

responsibilities of the board

Overseeing and monitoring the activity of fics and ensuring the independence of the dispute resolution process.

Appointing the Chairs of the Panel, Adjudicators, consumer representatives and industry representatives to the Panel.

Ensuring that the Panel and the Adjudicators adhere to the Rules, but not to the extent of overturning a decision made by either body.

Analysing statistical information in relation to fics.

Effecting appropriate changes to the Rules after consultation with interested stakeholders.

Ensuring that fics meets all government benchmarks, policies and guidelines for complaint handling schemes to ensure fics maintains its status as an approved edr scheme.

Identifying recurrent or ongoing industry problems and reporting serious misconduct or other matters required by the regulators.

Analysing and commenting on (if appropriate) the Annual Review.

Satisfying itself that the promotional programme or projects are adequately funded.

10

in 2007 the board attained many

significant achievements, including:

• Approved amendments to the fics Rules

to amend the monetary limits as of 1 July

2008 as follows:

– lump sum life insurance limit be

increased from $250K to $280K

– life insurance income stream risk

limit be retained at $6,000, subject

to indexation commencing on 1 July

2010 retrospective to 1 July 2007

– investment (non-life insurance)

complaints limit be increased from

$100K to $150K

• Endorsed proposal for fics to merge

operations with the Banking and Financial

Services Ombudsman Limited (BFSO)

and Insurance Ombudsman Service

Limited (IOS).

• Approved the 2008 Corporate Plan,

which focuses on the merger proposal,

continuing emphasis on timeliness in

resolution of complaints, maximising

the number of complaints dealt with by

conciliation and negotiation, renewing

the focus on communication and

consultation with Members, implementing

the increased monetary limits and

participating in the independent review of

asic Regulatory Guide 139.

• Adopted the targeted approach to

having an independent review based

on file audits for 2008. fics is required

under asic guidelines to implement an

independent review every three years.

• Kept asic informed, at both Board

and management level, on significant

issues including the review of the Rules,

Westpoint, systemic issues and the 2008

independent review.

meetings

The fics Board met three times in

Melbourne and four times in Sydney

during 2007.

committees at 31 december 2007 audit and risk committee

Chair: David Squire

Members: Winsome Hall, Alison Maynard*

(Chief Executive) and Brian de Kock*

(Company Secretary)

Meetings: Seven

Function: Monitors accounts, reviews

annual accounts and meets with auditors.

board nominations committee

Chair: Peter E. Daly, AM

Members: Dominic Alafaci and Jenni Mack

Meetings: Three

Function: Nominates people for positions

of Director of the Board, and consumer

and industry panel representatives.

panel chair selection committee


Members: Dominic Alafaci, John Berrill

and Alison Maynard

Meetings: Four

Function: Nominates people for positions

of Panel Chair and Adjudicator.

board rules committee

Chair: Jenni Mack

Members: David Squire, Alison Maynard*

Meetings: Five

Function: Assists the Board and fics

Management Team to discharge their

obligations to have appropriate Rules

in place for the operation of fics and

to adhere to the Rules in effecting any

amendments.

stakeholder relations committee

Chair: Peter E. Daly AM

Members: Winsome Hall, Alison Maynard*,

Russell McKimm, Jim Simpson,

Trevor Slater*

Meetings: Three

Function: Identifies Member issues and

consults with the broader stakeholders

including Members, consumer movement,

industry associations and asic.

board review committee (independent triennial review)


Members: Jenni Mack, Alison Maynard*

and David Squire

Meetings: Two

Function: Selects a preferred independent

reviewer for submission to asic and Board

for approval.

external rules committee (appointed by fics management)

Chair: Jenni Mack

Members: Consumer representatives –

John Berrill and Justin Malbon.

Industry association representatives –

David Mico** (ifsa), David O’Reilly (ifsa),

Deen Sanders (fpa) and Doug Clark (sdia)

Meetings: Three (including one

teleconference)

Function: Provides the major consultative

vehicle for the Board on Rule changes.

In practice proposed Rule changes are

recommended to this Committee before

being considered by the Board.

* In attendance by invitation, to provide guidance

and advice

** fics Board and Management wish to express their

sadness at the passing of David Mico in 2007.

major board initiatives in 2007

11

peter e. daly am

Two major areas of focus dominated Board and senior management activities in 2007. The first was an extensive consultation with stakeholders in relation to an increase in the fics monetary limits. The second was the merger of operations with the Banking and Financial Services Ombudsman (bfso) and the Insurance Ombudsman Service (ios). The Board also continued its interest in retail client compensation, as well as providing strategic direction, monitoring and supporting all the activities of fics.

fics rules – monetary limits

The Board oversaw and participated in an extensive consultation process with all stakeholders

for the monetary limits for complaints which can be accepted by fics. In addition, issues such

as whether monetary limits should apply to Panel awards, but not be a barrier to entry, were

canvassed with stakeholders.

The final outcome was that new monetary limits were adopted by the Board at its meeting on

23 November 2007 and will come into effect on 1 July 2008. The life insurance lump sum limit was

increased to $280,000 and the life insurance income stream limit will be increased in accordance

with the cpi from 1 July 2010. The limit for all financial advice and all other non-life insurance

complaints was increased to $150,000. The increase in the limits has been generally well received

by stakeholders.

merger

fics has been working with bfso and ios with a programme of shared services, so far including a

joint call-centre, shared IT and telephony as well as joint marketing and promotional services.

In 2007 the Boards of the schemes agreed ‘in principle’ that the next step forward was a merger

of operations.

chair of the board reportin 2007 the board’s most important decision was to approve the merging of the operations of fics, bfso and ios.

12

The schemes commenced in-depth

consultation with all stakeholders, with a

focus on ensuring we continue to meet the

needs and expectations of consumers and

financial service providers, while maintaining

the individual specialisation and expertise

currently offered by each scheme.

It is envisaged the new Financial Ombudsman

Service will provide dispute resolution

services for around 80% of all the disputes

which arise in relation to the provision of

financial services in Australia. The Financial

Ombudsman Service will simplify processes

for both consumers and industry participants,

establishing a ‘one stop shop’ for the vast

majority of consumer and small business

disputes between the community and financial

service providers.

Board members Ms Jenni Mack, Mr

David Squire and myself served on the

Implementation Advisory Committee

(IAC), which was formed to investigate and

report to the three existing Boards with its

recommendation in relation to the merger. The

IAC’s final recommendation to proceed was

adopted by the three Boards in early 2008.

compensation

Another area of engagement for the Board

has been commissioning in-depth research in

relation to retail client compensation.

fics commissioned Melzan Pty Ltd to

identify any gaps in Professional Indemnity

(pi) insurance cover, to research models

currently operating in Australia and overseas

for compensating consumers, and to develop

options for a compensation scheme in

addition to one separate from pi requirements.

This part of the research is complete.

fics has now engaged Professional Financial

Solutions to undertake further research with

the aim of providing an economic model, for a

centralised ‘last resort’ fund. fics will further

communicate with stakeholders once the

Board has had the opportunity to consider the

research results.

board update

The membership of the fics Board remained

stable during 2007, and I would like to take

this opportunity to thank the Board Members

(see page 6) for their contribution to the fics

Board and its Committees during 2007. The

Board has made significant decisions during

2007 and has again supported effective

operations of fics and the Board.

thanks

I thank the full time Panel Chairs and

Adjudicators; Messrs Michael Arnold and

Michael Croyle, the sessional Panel Chairs

and Adjudicators; Messrs Terry Casey, Murray

Gerkens and Dick Viney, as well as all industry

and consumer Panel Members for their expert

decision making. The reports that follow in

this review provide an in-depth review of their

operations for 2007.

My sincere thanks to the Chief Executive,

Alison Maynard, and all the staff at fics for

the valuable contribution they make on a

daily basis. As we work in an increasingly

complex environment on issues such as

member relationships, convergence, and the

continued resolution of Westpoint complaints,

our staff have demonstrated the high skills

and level of commitment necessary to meet

these challenges and contribute to the

future development of the new converged

organisation.

Peter E. Daly am

Chair of the Board

13

new complaints in 2007

type of complaint number*

life insurance 388

financial planning 336

stockbroking 165

management investments 120

complaints againstnon–fics members 100

other (e.g. futures traders, contracts for difference) 18

total 1,127

* These figures include Wespoint complaints

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An extensive consultation in relation to changing the monetary limits for complaints received by fics, the continuation of work generated by complaints arising from the collapse of the Westpoint Group of Companies, combined with plans for the merger of operations with the Banking and Financial Services Ombudsman and the Insurance Ombudsman Service had us all focussed and working hard during 2007.

merger

After an ‘in principle’ decision by the Board of fics to merge operations with the Banking and

Financial Services Ombudsman (BFSO) and the Insurance Ombudsman Service (IOS) – referred to

in the Chair of the Board’s report at page 11 – the Banking and Financial Services Ombudsman and

the Insurance Services Ombudsman and myself worked as a Steering Committee for the project.

The Steering Committee has supported the work of the Implementation Advisory Committee

and, in accordance with the early 2008 decisions of the three Boards to commit to the merger,

has instituted major projects in the areas of the new constitution, terms of reference,

membership, stakeholder communications, public relations, human resources, information

technology and administration.

The aim of the Financial Ombudsman Service is to offer independent dispute resolution services

under one roof for around 80% of Australian banking, insurance and investment disputes.

Although the goal is to have the merger take place on 1 July 2008, it is expected that complaint

handling and the fee/levy structure will remain the same as current processes, but moving

towards one process and one charging mechanism over time. It is planned that the new

procedures and a new fee structure will be in place by 1 January 2010 at the latest.

Members will be regularly provided with merger information leading up to and after 1 July 2008.

chief executive reportmonetary limits, westpoint and planning a merger

kept us working hard in 2007.

alison maynard

chief executive

14

monetary limits

The 2002 Independent Review of fics

recommended that fics should work towards

increasing its monetary limits to match those

of the Australian Banking Industry Ombudsman

(now bfso). The review of the monetary limits

was originally part of a larger review of the

fics Rules conducted during 2006; however,

it quickly became apparent that the monetary

limits raised a specific set of issues that would

be better dealt with separately. Therefore,

an extensive consultation was conducted

during 2007.

A consultation paper was issued in May

2007 with consultation meetings conducted

in Melbourne, Perth, Sydney and Brisbane,

followed by a further discussion paper

released in August 2007 and the receipt of

submissions to the review. All submissions

to the review not marked confidential were

placed on the fics website. See page 29 for

more information on this process.

At its meeting on 23 November 2007 the fics

Board resolved to amend the monetary limits.

The limit relating to lump sum life insurance

complaints increased from $250,000 to

$280,000. The life insurance income stream

limit will be increased in accordance with the

cpi every three years, starting from 1 July

2010. The limit relating to complaints other

than life insurance increased from $100,000 to

$150,000. The new monetary limits will apply to

complaints received after 1 July 2008, provided

the complainant did not know or could not have

reasonably known all the relevant facts before

that date.

New limits apply to the amount of the

complaint when it is first made to fics in

writing and will not be affected by any

fluctuations in the value of the complaint

after that time. Some temporary relief from

the monetary limits is available from Members

with professional indemnity insurance due

for renewal between 1 July 2008 and

31 December 2008. The latest date at which

the new limits can apply is 31 December

2008. The Board also resolved to review the

monetary limits as at 1 July 2009 with the

objective of achieving parity with other major

edr Schemes in the financial sector.

westpoint

fics received 82 new written complaints in

relation to the issues arising from the collapse

of the Westpoint Group of Companies in

late 2005. A total of 111 complaints were

referred for investigation during 2007; being

108 complaints of inappropriate advice, two

complaints concerning misrepresentation

and one concerning non-disclosure of risk.

It is pleasing to report that a significant

number of outcomes in relation to Westpoint

complaints have been achieved. During

2007, 53 complaints were finalised: 26 by

case management and conciliation; with 27

resolved by the fics Panel or Adjudicator.

One Member has launched a Supreme Court

challenge to a Panel determination. The

issue in contention is how the Panel has dealt

with the Member’s arguments in relation to

proportionate liability. The case was heard in

the Supreme Court of Victoria in May 2008

but no decision has been passed (as at time

of printing).

During 2007 five Members with complaints

about Westpoint issues entered into

administration; joining two Members who

entered into administration during 2006. In

total 170 complaints were affected; some

complainants may receive a settlement of a

portion of their claims through the liquidation

process, however, it is anticipated that most

will not receive any payment in relation to

their claims.

See page 31 for more information on

Westpoint complaints in 2007.

compensation

fics has commissioned independent research

in relation to the viability of setting up an

industry based consumer compensation

mechanism specifically targeted at

circumstances such as those described above.

The proposal is for a scheme of last resort

being a mechanism to which consumers

may turn when a financial services licensee

has gone into liquidation, has ceased to be

a corporate entity or otherwise cannot be

found and there is no professional indemnity

insurance which responds to the claim.

The consultants have conducted initial

research in relation to the establishment of a

scheme and have been engaged to establish

an economic model and prepare a further

report for consideration by the Board.

professional indemnity insurers

Many Members of fics rely on their

Professional Indemnity (pi) insurance when

responding to a complaint at fics. This is not

the case for all complaints and depends on

the level of cover held by the Member, and the

policy terms and conditions.

During 2007, fics initiated a series of meetings

with representatives of pi insurers. Topics

for these meetings included fics processes,

15

Panel operations, monetary limits, pi insurer

participation in the fics process and future

communications between the industry and fics.

Both the representatives at the meetings and

fics agree that the communication has been

valuable and that a programme of regular

meetings will continue in the future.

complaints

fics dealt with 7,501 new telephone contacts

during 2007 and received 1,127 new written

complaints (see side panel on page 13) of

which 618 were progressed to investigation by

fics Case Managers.

conciliation

The conciliation team received 199 referrals

during 2007, 92 conciliation conferences were

conducted and 12 cases were resolved before

a conciliation conference was organised.

Conciliators also case managed and resolved

through case management an additional 40

cases. The resolution of rate of cases referred

to the conciliation team in 2007 was 58%, with

an average time of 93 days to resolve cases

once they were referred to the conciliation

team. The conciliation conference process has

continued to receive excellent feedback with

a high degree of satisfaction expressed by

Members and consumers.

panel/adjudicator

The Panel and Adjudicator finalised 164

complaints by way of determination with 99 in

favour of the complainant and 65 being found

in favour of the Member. For more information

on Panel activities please see the Panel Chair’s

report on page 16.

fics complaints manual for members

fics has more than 2,700 Members; many

of whom only occasionally receive complaints.

Following discussions with Members from

various categories, fics recognised that

Members needed more assistance from

fics to deal with complaints. This is why

the fics Complaints Manual for Members

was developed.

The manual contains basic information about

fics and its processes as well as an outline

of the responsibilities and expectations of

the Member when they receive a complaint

via fics.

The main focus of the manual however, is to

guide Members through the process as well

as provide tips and ideas on how to respond

to a fics complaint. Templates of ideal

responses and areas to consider when

responding are included.

fics has received overwhelmingly positive

feedback on the release of the manual.

policy

2007 was a busy year for policy makers in

the financial services, consumer and dispute

resolution sectors. fics made submissions to

asic in relation to compensation and insurance

arrangements and proposals for change in the

unlisted, unrated debenture sector.

A submission was made to the Victorian

Government Law Reform Committee enquiry

into property investment.

Jointly with bfso and ios, fics made a

submission to the Victorian Government’s

Law Reform Committee discussion paper in

relation to Alternative Dispute Resolution, as

well as the Productivity Commission Inquiry

into Australia’s Consumer Policy Framework.

fics participated in the Standards Australia

Committee mb015 which is examining the new

International Standard for External Dispute

Resolution Schemes to ascertain its suitability

for the Australian environment. In addition, the

Committee is responsible for deciding if the

Australian Standards and complaints handling

should be reviewed in 2008.

thank you

I would like to thank the Chair and other fics

Board Members for their vision, strategic input

and support during 2007, as well as their hard

work on Board Committees.

I thank the Panel Chairs and Members for

their continued high quality decision making.

The range of activities and outcomes narrated

in this report could not have been achieved

without the effort, integrity and dedication of

the Management Team and staff, so I sincerely

thank them for their contribution.

Alison Maynard

Chief Executive

16

michael arnold

national panel chair

panel chair reportthe panel and adjudicators have overseen a large number

and variety of disputes in 2007.

This year the Panel determined 128 complaints.

panel members

I thank my colleagues the Panel Chairs/Adjudicators – Michael Croyle, Murray Gerkens and Dick

Viney – for their contribution to the Panel operations.

I must also thank our Panel Members from a number of industries and professions. These include

Life Insurance: Rob Emery, Glenys O’Leary, Iain Ross and Graham Slater; Stockbroking: Andrew

Gillon, Marc Huinink, Alex Knipping, Barry Murray and Matthew Wigzell; Financial Planning

and Managed Investments: Anne Bartholomew, Greg Cunningham, Warren McKeown, Wayne

Moriarty, Peter Roan, Brian Scullin, Peter Van West, and Gavin Wright.

I also thank the consumer representatives; Stephen Duffield, Dr Justin Malbon, Bill Mitchell, Paul

O’Shea and Joan Staples.

statement of advice (soa)

I note that an enquiry and consultative process has been established to simplify soas. Such a step

has merit. However the importance of the soa must not be diminished as part of the investment

process. This document is the means by which a financial adviser acknowledges their client’s

circumstances and objectives and articulates a strategy consistent with the client’s needs. soas

should be simple narratives that are tailored to the client’s needs and expectations, and which

clearly and unambiguously set out the advice, its scope and basis and the reasons that underpin it.

The soa should contain clearly identified and stated recommendations relating to a client’s

circumstances and goals and present the recommendations in a clear and comprehensive

manner. Issues, concerns and problems should be recorded and the adviser’s recommendations

should be addressed at two levels, namely, strategy and product. The advice should address any

inherent conflicts (such as where the client’s objectives clash with his/her risk tolerance) and

should include a determination of the proposed remedial actions as well as a discussion of the

factors taken into account.

17

The timing of the provision of the soa is

particularly important. Clients must have

adequate time to consider its contents and

the recommendations that have been made.

The Panel has dealt with a number of matters

in which financial advisers have relied on an

assertion that the client was provided with

limited advice. As advisers always have an

obligation to provide appropriate or suitable

advice, if the advice they are giving is limited

or based on incomplete information about

the client’s relevant personal circumstances,

they must inform the client of this. In

these circumstances, advisers must warn

their clients that they should consider the

appropriateness of the advice before they

act upon it. Advisers should ensure that this

warning, and the limitations on their advice, is

clearly and prominently addressed in an soa.

Section 946C of the Corporations Act 2001

and fpa Rule of Conduct 114 is relevant in

this regard. The basic aim is to ensure that

an soa is provided at the same time as, or as

soon as practicable after, personal advice

is provided to a retail client. In any event,

it must be provided before any financial

service related to the advice is provided. By

way of example, any request to transact or

to implement an adviser’s recommendation

– such as arranging for a financial product to

be issued – should not be effected unless an

soa has been prepared and presented to the

client. The reason for this is clear. As the soa

is the adviser’s consideration of the client’s

relevant circumstances and the adviser’s

recommendations are tailored to the client’s

needs and objectives, it is critical that clients

read and understand the advice before they

act on it.

The law does allow advisers to provide

additional services without first providing

an soa under the Corporations Act 2001

(sections 946C (2) and (3)) in time critical

cases where:

• the client has expressly instructed

the adviser to act immediately or by a

specified time, and

• it is not reasonably practicable to provide

an soa before acting in accordance with

the client’s express instructions.

However if this is done there should be clear

and recorded instructions from clients to

satisfy the Panel that these exclusions apply.

This is particularly significant where it was an

illiquid investment and there was no cooling-

off period. In any event, the adviser must

provide clients with an soa after executing

the client’s instructions and within five days

of performing the service. Matters have come

before the Panel where there is no evidence

that these subsections should apply as the

investment was not time critical and an soa

should have been provided and considered

before investment. The complainant was

locked into the investment and any discussion

that he would have after considering the soa

after the investment was made would have

been meaningless.

There are often issues in relation to the

provision of the research investment material

prior to the investment with conflicting

allegations about if and when any research

material was provided. Such issues would

not arise if advisers have presented the

soa together with research material clearly

documented as attachments or inclusions

prior to the investment being made.

This failure with compliance does not

necessarily mean that the Member is liable

for the losses sustained by the complainant.

The Panel must look at the suitability of the

investment which involves such things as

the Member’s risk profiling, adequacy of the

research, appropriateness of the advice and

whether the placement of the complainant

in the investment caused his loss. However

it must be understood the placement of a

client’s funds in an illiquid investment without

the benefit of an soa does not assist a

financial adviser in persuading the Panel that

he acted honestly, efficiently and fairly in the

handling of a client’s affairs.

risk profiling

The Panel has noted in a number of complaints

before it that there is a tendency for financial

advisers to rely on risk profiling by way of

consensus or selection by a client. Risk

profiling is only one aspect of obligations

under section 945A to determine the

suitability or appropriateness of investment

recommendations.

Risk profiling is a matter of some controversy

in financial planning. Despite this it has been

generally used in the financial planning

profession to describe two different

processes. The first is risk tolerance testing,

which tests a client’s aversion to risk, and the

second relates to investment strategy testing.

Risk profiling was discussed by McClennan

J in Paige v FPI Limited [2001] NSWSC 627

(Paige’s Case). The decision considered the

importance of correctly identifying the risk

profile. It was apparent from the decision that

18

the consequence of an inept exercise could

be totally inappropriate investments for the

client’s needs.

The Panel has particular concerns about where

financial advisers rely on their risk profiling of

the client yet the risk profiling process adopted

was questionable, in that it fails to investigate

the complainant’s concerns and reliance was

placed on the complainant’s own assessment.

Having a client self-assess his or her own risk

profile does not satisfy the obligations under

section 945A. Nor does achieving a risk profile

by agreement or consensus alleviate the

Member’s professional responsibilities under

the Corporations Act 2001.

to the future

I have previously expressed my concerns

about the inadequacy of the fics monetary

limits and the inequity in their inconsistency

with the monetary levels in comparable

external dispute resolution schemes. The

announcement of the increase in fics’

monetary limits was the culmination of much

stakeholder consultation and hard work from

various fics staff over the last few years.

From a Panel Chair’s perspective, the

increase means that the new monetary limits

will be more relevant to current financial

services. The Panel accordingly will be able

to determine complaints for higher amounts

which have cost and time saving benefits for

Members and complainants.

Michael Arnold

National Panel Chair

complaints determined by panel in 2007

type of complaint determined by panel number


life insurance 53

stockbroking 5

management investments 2

other 2

total 128

In addition there have been 63 decisions by the Adjudicators and 20 rulings on jurisdiction.

��

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national panel chair

Michael Arnold

panel chair

Michael Croyle

alternate panel chairs

Murray Gerkens

Dick Viney

life insurance representatives

Rob Emery

Glenys O’Leary

Iain Ross

Graham Slater

stockbroking representatives

Andrew Gillon

Marc Huinink

Alex Knipping

Barry Murray

Matthew Wigzell

financial planning representatives

Anne Bartholomew

Gregory Cunningham

Warren McKeown

Wayne Moriarty

Peter Roan

Peter Van West

Gavin Wright

managed investments representative

Brian Scullin

consumer representatives

Stephen Duffield

Dr Justin Malbon

Bill Mitchell

Paul O’Shea

Joan Staples

the fics panelas at 31 december 2007

20

case management & conciliation report the fics case management team comprises conciliators, case managers and enquiries officers.

michael ridgway conciliation manager

fics’ Case Management Team of conciliators, case managers and enquiries officers had another busy year in 2007, continuing to deal with a significant number of Westpoint complaints, and handling complaints and queries about several other significant corporate events and collapses. 2007 saw a slight decrease in new complaints received and progressed to investigation. Excluding Westpoint complaints received, this decrease in complaints received would have been greater.

fics’ Case Management Team continued to progress and resolve cases efficiently and effectively,

and maintained timely case resolution and referral timeframes in 2007. Case timeframes have,

however, been slightly impacted in 2007 by Westpoint cases that were placed on hold in late

2006 during litigation in the Federal Court. It is pleasing, however, that in 2007 a number of

Westpoint cases were resolved by mutual agreement between the parties through conciliations

and negotiations facilitated by case managers and conciliators.

A summary of case management and conciliation results is outlined below. Further case statistics

are detailed on page 53 and in the Westpoint report on page 31. Case studies of complaints

resolved by case management are outlined on page 42.

summary of cases received and outcomes

• In 2007, fics received 1,127 new complaints (1,375 in 2006). Of these, 618 were allocated to

a case manager or conciliator for investigation and conciliation (724 in 2006).

• Case managers and conciliators resolved and closed 440 complaints in 2007 (464 in 2006),

reflecting the lower number of complaints received. 241 complaints were referred to the

Panel or Adjudicator in 2007, compared with 203 in 2006. This increase in referrals was due to

the large number of Westpoint complaints received in 2006 and 2007.

case management by type %

life insurance 34


stockbroking 15

managed investments 11

non-fics member/other industry 10

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• Of the complaints that were referred for

investigation in 2007, there was a pleasing

increase in the percentage of complaints

resolved without requiring referral to the

Panel or Adjudicator. As a proportion of

the complaints allocated for investigation,

71% of complaints were resolved through

conciliation and case management and 29%

were referred to the Panel. In 2006, the

case management resolution rate was 64%.

• In 2007, there was an increase in the

number and proportion of complaints

resolved directly by fics Members before

fics’ investigation commenced.1 20%

of cases (238) were resolved before

investigation in 2007, compared with 14%

(184) in 2006.

After taking into account the increase in

financial planning complaints received due

to Westpoint, the proportions of complaints

received by industry type remained fairly

consistent with previous years.

1 This included complaints resolved directly by the Member before allocated for investigation and complaints resolved directly after being allocated to a Case Manager or Conciliator. fics’ Case Management process provides Members with a further opportunity to resolve a complaint directly with a complainant after a complaint has been through the Member’s idr process and within 21 days of fics’ investigation commencing.

summary of conciliation in 2007

Within the fics Case Management Team,

qualified conciliators have the role of

conducting conciliation conferences between

Members and complainants. The conciliation

conference process is a very time and cost

effective resolution option for parties to a

complaint, offering them a means to reach an

amicable, mutually acceptable outcome to

a complaint. Most conciliation conferences

are conducted by teleconference, which

complainants and Members find to be a

convenient and efficient way to participate in

a conciliation.

2007 was another consistent year for the fics

Conciliation Team. The proportion of cases

referred for conciliation after proceeding

to investigation continued to increase, and

the conciliation resolution rate increased

compared with 2006.

conciliation overview for 2007

total cases referred to conciliation team in 2007 199

referred cases deemed suitable for conciliation 171 (86%)

conciliation conducted in 2007 92

referred cases resolved before conciliation 12

average resolution time 93 days*

* This average resolution time includes the 10% of cases that were resolved after a conciliation conference, following negotiations between parties facilitated by a conciliator.

conciliation numbers and outcomes

• 92 conciliation conferences were

conducted, with 12 cases being resolved

before a conciliation conference was

organised.

• The resolution rate of cases referred to

the conciliation team in 2007 was 58%

(55% in 2006).

• The Conciliation Team took an average

time of 93 days to resolve cases, once they

were referred for conciliation. This is a

slight increase compared with 2006

(77 days).

• Of the 499 cases that progressed

into Investigation status in 2007, 40%

(199) were referred for a conciliation

conference.

22

survey results

The Conciliation Team sends surveys to all Members and complainants who participate in a conciliation conference. Outlined below are some of the results from the conciliation surveys returned.

outcome sought

• 15% of complainants were seeking compensation of up to $10,000

• 50% were seeking compensation of between $10,000-50,000

• 15% were seeking compensation greater than $50,000

• 21% did not answer this question or did not nominate an amount.

conciliation conference experience

• 93% of members and complainants agreed or strongly agreed that they were treated

equally in the conciliation

• 98% agreed that they had the opportunity to speak freely

• 96% of members and complainants agreed or strongly agreed that they were able to

discuss their concerns in their conciliation

• 85% of members and complainants disagreed or strongly disagreed that they felt

pressured to reach a resolution in their conciliation

• 73% of members and complainants agreed or strongly agreed that the conciliation helped

move the dispute forward

• 99% of members and complainants agreed or strongly agreed that the conciliator

conducting their conciliation was fair and impartial, and

• 96% agreed or strongly agreed that the conciliator managed the process effectively.

23

other activitiesin 2007 fics was involved in various activities aimed at helping both members and consumers.

fics complaints manual for members

In late 2007, the fics Complaints Manual for

Members was finalised.

The Manual was designed to assist Members

in providing an appropriate response to fics

complaints and to help Members understand

the various fics processes.

A copy of the Manual was posted to every

Member and a PDF of the manual can

be found at www.fics.asn.au under ‘Press

Releases & Publications’.

member internal dispute resolution (idr) training

fics continued to hold the Member

idr training workshops in 2007. These

workshops are designed to help Members

with information and skills to avoid, manage

and resolve complaints using their own idr

processes.

Four workshops were held in total, with two

in Melbourne and two in Sydney – with 67

Members attending.

For another year, 100% of attendees stated

they would recommend the workshop to other

fics Members while over 90% of attendees

rated the workshop ‘excellent’ or ‘good’.

participants survey

In 2007 the ‘fics One Minute Member/

Consumer Satisfaction Surveys’ (Participant

Surveys) were sent to all parties when a

complaint is finalised – whether at case

manager stage or Panel or Adjudicator stage.

Though limited by the number of questions

that can be asked, the survey results still

provide valuable feedback.

Between 1 January 2007 and 31 December

2007, 1,214 cases were closed at fics and

surveys were sent to both Members and

complainants for each case. During this period

109 Member surveys and 303 complainant

surveys were returned.

key results:

• 95% of Members and 92% of consumers

thought the information provided to them

about how fics works was sufficient


thought fics staff were helpful


thought fics was fair

Following these surveys, 29 Members and 62

consumers requested a follow-up call from

fics to provide additional feedback.

handling complaints about fics

fics has its own idr function where Members

and consumers can complain about fics. 152

complaints about fics were received in 2007

by the Complaints Manager, with the most

common complaints related to dissatisfaction

with Panel/Adjudicator decisions (35%).

Every issue raised is addressed as quickly as

possible by the fics Complaints Manager. If

an issue cannot be resolved immediately, the

complainant is contacted within seven days

and the ongoing process is explained. The

aim is to resolve simple complaints within

seven days and to resolve issues that require

specialist advice or further investigation within

28 days.

Apart from resolving these complaints, fics

is using the feedback received to continually

improve the services to consumers and

Members at all levels of the fics process.

24

“Mr Slater provided valuable information,

demonstrations and training to the

adjudicators to hone the skills required

to undertake resolution of complaints by

alternative dispute resolution methods…

The office found Mr Slater’s programme

most beneficial and of real value.”

Judge Peet Nienaber

South African Ombudsman for Long Term

Insurance Office

In 2007 Trevor Slater, Manager National

Relations Team, was invited by the South

African Ombudsman for Long-term Insurance

to conduct a training programme on resolving

complaints using alternative dispute

resolution methods. The training programme

was jointly funded by the Australian Agency

for International Development (AusAID), the

South African Ombudsman for Long Term

Insurance and fics.

Trevor’s programme was conducted in Cape

Town over the first two weeks in May 2007.

south african ombudsman for long-term insurance

The office for the South African Ombudsman

for Long-term Insurance was established in

1985. Its function is to mediate in disputes

between subscribing members of the long-

term insurance industry and policyholders

regarding insurance contracts. It is an

independent office which is accountable to an

independent Long-term Ombudsman Council

for providing an efficient and independent

service to policyholders and others in

response to disputes arising from long-term

insurance policies. It is similar to FlCS in that it

is free to consumers and industry subscribers

are bound by the Ombudsman’s rulings.

conciliation training

The main aim of the training programme was

to establish a formal conciliation process and

to provide the team with the necessary skills

that could be used to resolve complaints by

reaching of mutually beneficial outcomes by

way of agreement between the parties.

At the time the Ombudsman’s process for

reaching agreement between the parties

was by way of a settlement which occurred

when it was not possible, on the balance of

probabilities, to make a clear determination.

These settlements were commonly achieved

by a sharing of responsibilities by the parties,

i.e. a 50% split. It was envisaged that a

successful conciliation programme would

increase resolution as it would increase the

options for beneficial outcomes the parties

will be able to consider.

training outcomes

The following summarises the content that

was passed onto the Ombudsman staff and

the outcomes of the programme:

• Conciliation process and knowledge of

mediation theory

• Knowledge and understanding of

alternative dispute resolution skills

• Communication skills for the Ombudsman

support staff

• Establishment of an ongoing relationship

between fics and the Ombudsman:

• Exchange of information on the operations

of both organisations, and

• Initial supply of information of the

complaint handling skills workshops

conducted by fics for their Members

to the insurance industry.

fics takes conciliation to south africa

25

alison maynard, chief executive

5-7 march fics Conference (Melbourne)

22 may sdia Retail Broking Committee

23-24 july Consumer Representatives Conference (Sydney)

28-29 july fics jointly hosted the Consumer Conference (Sydney)

1-3 august ifsa conference (Brisbane)

13 september asic’s Senior Management Workshop (Melbourne)

26-28 september International Network of Financial Ombudsman Conference (London)

28-29 november fpa Conference (Sydney)

1 november anzoa Conference (New Zealand)

member liaison meetings Perth, Brisbane, Melbourne, Sydney

michael arnold, national panel chair

5-7 march fics Conference (Melbourne)

14 november Aviva Claims Department (Melbourne) – looking at what is fics,

how Conciliation and the Panel works, role of the Panel Chair, as well

as common pitfalls that insurers fall into

member liaison meetings Melbourne, Sydney

trevor slater, national relations manager

22 february mirvac presentation (Sydney)

1 march Centrelink presentation (Perth)

5-7 march fics conference (Melbourne)

7-9 march Qld fpa Planners Forum (Brisbane)

22-23 march QPlan Presentation (Brisbane)

28-30 march wa fpa Planners Forum (Western Australia)

26 april idr workshop (Melbourne)

30 april – 17 may South Africa conciliation training (Cape Town)

22 may idr workshop (Melbourne)

8 june QInvest presentation (Brisbane)

20 july finsia presentation (Melbourne)

24-25 july Consumer conference (Sydney)

26 july finsia presentation (Brisbane)

31 july Legalwise seminar

1 august finsia presentation (Sydney)

4-6 september socap conference

13 september Lend Lease – idr workshop

17-18 september TimeShare conference (Gold Coast)

18-19 october idr Workshop (Sydney)

8 november aci presentation

22-30 november Compliance conference (Gold Coast)

28-30 november fpa 2007 National Conference (Sydney)

12-13 december athoc idr workshops (x 2)

member liaison meetings Perth, Brisbane, Melbourne, Sydney

conferences and seminar presentations

26

6 january Mentioned in afr article ‘Westpoint: the little people lose’

9 january it News: Court backs fics to rule on Westpoint promissory notes

16 january Interview with Alison on monetary limits by Madeline Collins for ifa magazine

18 january Investor Daily: First Westpoint payouts soon

18 january Investor Daily: Key Players thrash out pi

18 january fics Member Bulletin on Westpoint statistics and update

22 january Investor Daily – Equity release to soar

23 january Article entitled ‘fics wins Westpoint jurisdiction ruling’

in Money Management e-newsletter

29 january ifa: Negotiations delayed over pi dispute

31 january Investor Daily: Image rethink for fics

31 january Age: Buyer beware

31 january smh: Shelter from bad advice

february Asset: Bridge over troubled water

february Australian Insurance Law Bulletin – fics Rules commence

february Financial Planning – fics gets green light on Westpoint

5 february West Australian: No shield from bad advice

5 february ifa – fics contemplates name change

5 february ifa – fics can handle Westpoint claims

6 february Sunrise: fics wants to be an ombudsman

8 february Money Management – fics Federal Court win proves bittersweet

8 february Money Management – Planners face funding mandatory indemnity scheme

9 february Investor Daily – Time (share) for a fight

12 february ifa – The main event – fics v imf

12 february Money Management – Planners face funding mandatory indemnity scheme

13 february Investor Daily – fics distances itself from compo fund

19 february ifa – Boutiques fear safety net monster

19 february ifa – The state of play

28 february Investor Daily – fics could scrap $100,000 threshold

march Consumer Directions – Creating Opportunities for Resolution

– fics 2007 Conference

march Asset – The value of mediation

1 march Insurance & Risk Professional – Court supports fics

5 march ifa – Planners meat in sandwich – Westpoint adviser

5 march ifa – Labor to quadruple complaints service limit

5 march ifa – June Smith interview

7 march Investor Daily – Govt warns over pi insurer pull out

7 march Money Management – Pearce calls for caution over fics monetary limits

12 march ifa- Govt warns on compensation cap

15 march Money Management – Warning over fics monetary limit

21 march Age – Compensation limits under scrutiny

22 march Money Management – Settlement in Westpoint action

26 march ifa – Easy solution to pi Insurance Crisis

26 march ifa – fics Monetary Limits – Discussion continues

26 march West Aust – Higher compensation sought for negligent financial advice

27 march Coffs Coast – Westpoint – not over yet

27 march Broadcast news- abc

27 march Money Management online – Most Fincorp complaints to fics from direct investors

28 march Age – Fincorp investors could miss Westpoint options

31 march West Aust – Planner group to shake up complaints process

april Asset- Westpoint- involved planners join aaa

april In the Black – Advocacy update

april Asset – Reversal of fortune

april Choice – Compensation for loss

3 april Investor Daily online – fics forced to accept higher claims

5 april Money Management – Most Fincorp complaints from direct investors

9 april ifa – fics forced to accept more claims

10 april Herald Sun – fpa hosts compensation talk

11 april Sunrise Exchange online – Court decision impacts complaint service

16 april ifa – Fincorp rating withdrawn

16 april ifa – pi delays persist for planners

16 april ifa – Complaints standards could cost millions

mediafics was prominently featured in the media in 2007, thanks in part to considerable interest in the westpoint collapse.

27

17 april Sunrise Exchange online – Complaints procedures go international

23 april ifa – Setting fics record straight

23 april ifa – Insurance woes dog planners

26 april Money Management – Planners face massive pi shortfall

30 april Alison’s response to the above article

may Asset – Opinions and allegations only

1 may Financial Review – Planners untouched by Fincorp ripples

1 may Financial Review – Paper tigers

2 may Champion Post – Protection from bad financial planning advice

3 may Money Management – Lawyers challenge fics over new monetary limits

3 may Money Management – Going into bat for planners

7 may Investor Daily online – fics seeks urgent feedback from industry

7 may ifa – Industry wears cost of Westpoint

8 may Financial Review – Disputes body chases power

10 may Money Management – Learning the hard way

14 may ifa – fpa taskforce slams fics

14 may ifa – fics monetary limits

21 may Herald Sun – Message, not the messenger

22 may Financial Review – Advice insurance is better than nothing

23 may Money Management online – Industry hopeful ‘compensation fund’

levy dropped from new pi regulation

24 may Financial Review – Labor on guard against the next Fincorp

24 may Financial Review – Industry bid to move on after recent mistakes

24 may Financial Review – It’s time to be professional and deal with responsibilities

28 may Letter to editor in ifa magazine – fics states its case,

(responding to earlier article titled fpa taskforce slams fics in 14 May)

30 may Money Management – All quiet on the complaints front over acr collapse

june The Senior – There to help

1 june Money Management – Risky business worries Bennetts

6 june aap newswire – fics orders Westpoint payments

6 june Investor Daily – Westpoint complaints upheld

6 june The Age – Compo ordered in Westpoint Case

6 june Herald Sun – Westpoint spruiker complaints upheld

7 june Australian Financial Review – Westpoint victim may never get justice

7 june The Australian – Panel up holds complaints and orders Westpoint compensation

7 june Geelong Advertiser – Westpoint to compensate

7 june Courier Mail – Westpoint investors win cases for compo

7 june Canberra Times – Westpoint consumer complaints upheld

7 june Townsville Bulletin – Westpoint ordered to pay

7 june Launceston Examiner – Complaints

7 june Ballarat Courier – fics orders Westpoint pay

7 june Geelong Advertiser – Super funds need to be monitored

7 june Herald Sun – Westpoint spruiker complaints upheld

7 june Cairns Post – Compo due

7 june Warrnambool Standard – Property investors warning

7 june Investor Daily – fics orders compensation payments

12 june asic media release – New online help for people making a complaint

13 june Sunrise Exchange – fics upholds Westpoint complaints

13 june Investor Daily – asic cuts down complaint legwork

16 june Weekend Australian – Bashful millionaires may be risking all

21 june Money Management – Sad stories prompt ‘Bennetts’ adviser protection plan

1 july ifa Magazine – Westpoint update

20 july Investor Daily – Planners have new voice

23 july Investor Daily – Planners need $2 million in pi: asic

27 july Money Management – fpa condemns pi insurance premium increases

23 july Investor Daily – Planners need $2 million in pi: asic

27 july Money Management – A duty of care

27 july Money Management – Bennetts wants more protection

30 july Independent Financial Adviser – Cost hike fears for planners

31 july Sunrise Exchange – Planners wary of pi rule

3 august Financial Review – Dispute bodies look at merger

3 august The Australian – Converge diverse financial complaints system, says mp

28

6 august ifa Magazine – asic faces investor interrogation

6 august ifa Magazine – Peter Roan

8 august Financial Planning Magazine – Mandatory professional indemnity takes effect

13 august Herald Sun – My advice? Keep up the fight.

15 august Online Money Management – Westpoint complaints flow finally stops

20 august ifa Magazine – Planning chiefs grill pollies

22 august Investor Daily – asic damages hike opposed

27 august ifa Magazine – Corporate watchdog limit hike opposed

30 august Online Money Management – Call for clarity on pi

30 august Money Management Magazine – CFPs named in Westpoint complaints to fics

31 august Financial Review – Flexible limits in one-stop complaints shop

september Investment & Technology – Dispute resolution merger on fics agenda

5 september Financial Review – Investors offered scant redress

12 september Investor Daily – Govt calling for more mergers

12 september Sydney Morning Herald – Growin’ in the whinge

17 september ifa Magazine – Complaints bodies set to merge

19 september Investor Daily – fpa hits out at complaints scheme

24 september ifa Magazine – fpa hits out at complaints scheme

25 september Sunrise Exchange – Planners fire broadside at complaints body

8 october ifa Magazine – Perth planning firm collapses

8 october Investor Daily – Rise in claims for bad advice

12 october Consumer News – Major financial edr schemes to merge

15 october ifa Magazine – Complaints against planners on the rise

25 october Money Management Magazine – Resolution without dispute: easing

the claims process

29 october ifa Magazine – fics news

5 november Investor Daily – Westpoint eats at PIS coffers

7 november Investor Daily – Planners banned from business

7 november Money Management – Westpoint claims two advisers

9 november West Australian – asic to take legal action

9 november Financial Review – Corporate cop back on the beat

10 november Financial Review – Planner promises help on Westpoint

12 november Financial Review – Insurance may decide Westpoint payout

12 november ifa Magazine – fics publishes Westpoint FAQ

13 november Financial Review – Spruikers face calls for national licence

15 november Money Management – Agreeing to disagree: dispute resolution clarified

19 november West Australian – Westpoint planner banned

19 november Shepparton News – asic set to bat for Westpoint investors

19 november Investor Daily – Dealer hit with third lawsuit (Masu)

19 november ifa Magazine – Westpoint-linked dealer group collapses

27 november Financial Review – Industry lobbying limits investor compensation rise

29 november Financial Review – Push to raise investors’ compo

29 november Money Management – Surveying the damage

30 november Financial Review – Tensions rising over dud advice

december Asset – Planners in the firing line

3 december West Australian – Upper limit on free complaints scheme raised

3 december The Age – Builder’s sister on asic charges

3 december West Australian – asic charges Carey’s sister

3 december ifa Magazine – Loophole puts Westpoint investors at risk

3 december ifa Magazine – Planners face higher pi insurance

6 december Money Management – Choice calls for higher cash limits

6 december Money Management – Watchdog goes after Westpoint

6 december Money Management – fpa seeks transparency on fics

10 december ifa Magazine – Lawyers slam Westpoint planners

13 december Money Management – The business of complaints

13 december The Age – Westpoint class action takes blow

13 december Newcastle Herald – New complaints service to streamline handling process

13 december Sydney Morning Herald – Court quashes Westpoint class action

29

mike d’argaville

legal counsel

monetary limitsin november 2007, the fics board resolved to raise our monetary limits from 1 july 2008.

fics can deal with complaints against Members provided that the amount of the complaint is within the fics monetary limits. fics sought to increase these monetary limits in 2007 for the following reasons:• Effect of inflation since the fics monetary limits were set

in 1991 • Increase in the size of complaints as value of life

insurance, super and investments goes up • Increase in the monetary limits applying to other

asic-approved edr schemes • The last fics independent review recommended an

increase to the fics monetary limits • asic’s requirement for fics to cover “the majority of

consumer complaints in the….industry”, and • Help Members fulfill their compliance requirements

of subscribing to an edr scheme that adequately covers their retail clients.

consultation/liaison process

The new fics monetary limits were the outcome of an exhaustive consultation process with

various stakeholders.

The issue of our monetary limits was reviewed as part of the general review of the fics rules

from 2004 onwards. Because of the difficulties in obtaining agreement among the stakeholders, a

decision on this issue was deferred for further consultation.

30

On 2 May 2007, a consultation paper was

issued seeking submissions from various

stakeholders on some alternative approaches

to application of the fics’ monetary limits and

the issues surrounding the appropriate level of

the monetary limits.

To coincide with the release of the

consultation paper, Member liaison meetings

were also held in Melbourne, Perth, Sydney

and Brisbane between 23 May 2007 and

7 June 2007. These meetings offered

Members the chance to voice any questions

and concerns about the consultation paper

to the fics Panel and senior management.

fics received 21 detailed submissions from

stakeholders in response to the consultation

paper and these were posted on the fics

website.

After the issuing of a discussion paper with

specific proposals for change, and further

consultation with industry and the consumer

movement, on 23 November 2007 the fics

Board resolved to raise fics’ monetary limits

from 1 July 2008.

new limits as of 1 july 2008

• Lump sum life insurance risk limit –

increase from $250,000 to $280,000.

• Limit for complaints other than life

insurance – increase from $100,000

to $150,000.

• Income stream life insurance limit – to

remain at $6,000 per month, but will

increase in accordance with cpi on 1 July

2010, and every three years after that.

when the new limits apply

The new monetary limits will apply to

complaints received after 1 July 2008,

provided the complainant did not know, and

could not have reasonably known, all the

relevant facts before that date.

The new limits will apply to the amount of

the complaint when it is first made to fics

in writing and will not be affected by any

fluctuations in the value of the complaint after

that time.

temporary relief if renewing

professional indemnity (pi) insurance

Members whose pi insurance is due for

renewal between 1 July 2008 and

31 December 2008 may apply for temporary

relief from the new limits.

A Member may be granted temporary relief,

if it has made reasonable efforts to obtain

adequate pi insurance by 1 July 2008, but

was unable to do so. If a Member is granted

temporary relief under this arrangement, the

increased limits will only apply to them from the

date their pi insurance is due to be renewed, or

31 December 2008, whichever is earlier.

The combination of the 1 July 2008

commencement date and the ‘temporary

relief’ provisions is to ensure that Members

have a realistic opportunity to renegotiate

their pi insurance to obtain sufficient cover to

meet the increased limits.

further review

On 23 November 2007, the fics Board also

resolved to:

• defer any amendment to the monetary

limits in the light of fics v Deakin pending

further consultation. fics’ current

approach to those issues (see fics Bulletin

46 for details) will continue to apply

pending this; and

• review the monetary limits as at 1 July

2009 with the objective of achieving parity

with the other major Edr Schemes in the

financial sector.

Y The full list of amendments passed by

the fics Board and the fics Rules as

amended, with effect from 1 July 2008,

can be found at www.fics.asn.au

31

westpoint updatethe number of westpoint complaints coming to fics fell in 2007.

The vast majority of complaints concern advice to invest in promissory notes of more than

$50,000 face value in various Westpoint property development schemes. The returns to

unsecured investors from some Westpoint schemes have been anticipated by the liquidators

to be nil and consumers are anticipating the total loss of the capital invested.

Statistics on Westpoint are included in the broader fics statistics on pages 53 to 70,

but have been extracted below.

westpoint snapshot

itemfrom 1 jan 2007 to

31 dec 2007cumulative from

2006 to 31 dec 2007

total phone calls about westpoint 84 559

total westpoint written complaints 82 412

total westpoint complaints that progressed to investigation 111 262

total westpoint complaints resolved by settlement/conciliation process 30 55

total westpoint complaints resolved by determination process 25 25

average time to resolve westpoint complaints* 304 days 228 days

total claim value of resolved westpoint complaints (i.e. actual claimed amounts) $2,418,775.78 $3,763,708.04

total paid out for resolved westpoint complaints (i.e. amount paid to complainants) $692,556.00 $1,040,618.00

* This figure is higher than normal as it includes time waiting for the Federal Court case/decision

westpoint complaints that progressed to investigation in 2007 – by policy type

policy type inappropriate advice non-diclosure risk misrepresentation total

promissory note 108 0 2 110

managed investments 0 1 0 1

total 108 1 2 111

westpoint complaints

status of westpoint complaints not finalised in 2007 no. %

investigation pending 23 14

complaint underinvestigation 37 230

complaint underadjudicator 5 5

complaint referred to panel 2 1

total 162 100

��

��

��

32

denny meadows

national operations manager

When fics identifies systemic issues and

cases of serious misconduct that arise from

complaints, these matters are referred to

the relevant Member(s) for response and

action. fics also reports information about the

systemic issue or serious misconduct to asic

in accordance with agreed guidelines

and thresholds.

A systemic issue is one that may have further

implications for a Member beyond the

immediate actions and rights of the parties to

the complaint. While several complaints of

the same type may indicate a systemic issue,

it is not enough to define or classify systemic

issues by reference only to the number of

complaints fics may receive. A systemic

issue can be identified by one complaint. This

is because the effect of the particular issue

will clearly extend beyond the parties to the

complaint.

Rule 49 provides that:

“the Board must ensure that fics has

procedures in place for dealing with

systemic issues and serious misconduct.”

The Board must consult with asic in relation to

changes to those procedures.

Y fics’ current procedures for handling

systemic issues and serious misconduct

are contained in Practice Note 4, which is

available at www.fics.asn.au

some systemic issues investigated during 2007 were:misrepresentation concerning deakin federal court case

A Member, with a number of Westpoint-

related complaints lodged against them,

wrote to complainants encouraging them to

accept an offer of settlement. In one letter

the Member made a number of incorrect or

misleading allegations about fics’ operations

and the Deakin Federal Court case*.

fics wrote to the complainants (with a copy

to the Member) correcting the Member’s

misleading statements about our procedures.

fics also wrote to the Member asking them to

produce material supporting its assertions or

alternatively take steps to correct their claims

that fics’ jurisdiction to hear complaints about

investments in Westpoint products “is still not

free from doubt” and that they ”understand

that certain financial planning groups intend

appealing the decision…”

In response, the Member accepted fics’

position that these assertions to complainants

were incorrect and advised that they would

be sending an appropriate correction to the

recipients of their previous letter.

fics was satisfied with this response and now

regards this issue as having been satisfactorily

resolved.

* fics went to the Federal Court to confirm its ability to deal with complaints about financial advisers recommending investment in Westpoint promissory notes after Deakin Financial Services questioned its jurisdiction

multiple ongoing problems with a member

fics has had a number of ongoing problems

with a large Member in relation to the way it

handles complaints. Recently, these issues

were consolidated and raised at a senior level

within the Member company.

The issues of concern included:

• unreasonably arguing over calculations

and delaying compliance with our Panel/

Adjudicator determinations

• failure to identify, acknowledge and

respond to a complaint

• failure to advise a complainant about fics

• unreasonably complaining about fics

taking on cases

systemic issues/serious misconductfics has a responsibility to identify systemic issues and cases of serious misconduct that arise from complaints.

33

• unsubstantiated accusations that fics was

driving a complaint

• complaining about fics’ handling of a

matter, then retracting the complaint

• refusing to stop an adviser from pursuing a

claim for fees in the Small Claims Tribunal

whilst a complaint with fics was on foot, in

breach of the spirit of Rule 23

• refusal to provide a further substantive

case response to fics, and

• unprofessional conduct in dealing with and

responding to fics staff requests

for information.

As a result of the discussions about these

issues the Member agreed to:

• restructure their complaints team, so

that fics would no longer deal with

the complaints officer who had been

responsible for most of these problems

• brief the new Complaints Manager on

fics’ expectations and requirements

• respond to complaints in a timely manner

• provide information requested as well as

complying with determinations within the

stipulated time frames, and

• generally, be more cooperative with the

processes of fics.

fics has noticed significant improvements in

the Member’s conduct and will continue to

monitor the Member’s performance in the

light of these promises.

failure to disclose significant differences between probable end values and original projections

In a number of recent cases, complainants

who had subscribed with a particular Member

for future benefits stated that they were

very surprised to learn that the total benefits

they received were substantially less than

the amounts originally projected when they

commenced making contributions towards the

future benefits.

From the perspective of the complainants, the

two main issues causing concern were:

(a) the extent of the shortfall between original

projections and actual benefits paid, and

(b) the failure by the Member to notify the

complainants of the impending shortfall

until the commencement of the first year

in which the benefits become payable.

fics accepted that the projections made when

the complainants first joined and commenced

contributing met industry standards at the

time for making projections. Further, the

failure by the Member to produce benefits

in the amounts forecast is not a matter within

fics’ jurisdiction unless there is any non-

disclosure or misrepresentation when making

the projections.

However, what concerned fics was the

Member’s failure to produce meaningful

updated projections in sufficient time to allow

complainants to review their plans, especially

where it has (or should have) become

apparent to the Member that the benefit

shortfalls were likely to be significant.

After exchange of correspondence and face-

to-face discussions, the Member agreed

to introduce a number of new measures to

improve its disclosure of future benefits to

consumers.

fics was very pleased with this outcome and

regards the issue as satisfactorily resolved by

the Member.

compliance with fics’ procedures

fics continues to actively engage with its

Members in order to improve their idr

procedures and cooperation with fics.

When fics’ Rules were amended in 2007 a

new Rule 22 was introduced which specifically

required Members to comply with the Rules

and any procedures adopted by fics for the

purposes of resolving complaints. Under

clause 11.6 of fics’ Constitution a Member

can be expelled (after due process including

notification of asic) for amongst other things,

refusing or neglecting to comply with the Rules.

Accordingly, a Member’s failure to co-operate

with fics’ Rules and complaint handling

procedures is now being dealt with under these

provisions rather than as a systemic issue.

Guidelines to the operation of our Rules,

including Rule 22, were developed in early

2008.

Y You can see these guidelines at

www.fics.asn.au

34

fics 2007 conference highlightsthe fics 4th annual conference was held at the park hyatt hotel, melbourne, in march 2007.

The theme of the conference was ‘Creating

opportunities for resolution’ to reflect fics’

desire for everyone to have the chance to learn

and share some ideas, research and practices

on how to resolve disputes more efficiently.

fics held pre-conference workshops on

Monday 5 March, designed for delegates who

had not been to a fics complaint handling

workshop before (or wanted an update).

fics is grateful to the following presenters

who have kindly consented to having part

of their presentations reproduced on the

following pages.

tuesday 6 march 2007 – day 1

The program proper began on Tuesday morning with a Conference Welcome by Peter E. Daly,

AM, Chair of the Board. fics was also fortunate to have the Hon Chris Pearce, mp, Parliamentary

Secretary to the Treasurer, give the opening address. Other Monday sessions included:

topic/title presenters

achievements, reflections and statistics alison maynard, fics chief executive

the panel process michael arnold, fics national panel chair

panel workshops various

complaint processes that work for fics members

noel whittaker, co-director, whittaker mcnaught pty ltd, financial plannerslisa gay, general counsel, goldman sachs jb were, stockbrokers.

applying the new australian complaints standard to an idr process(see pages 36-37 for more)

bill dee, compliance specialist and author of the why and how of complaints handlingjames thomson, australian projects manager, standards australia

questions on notice chaired by david squire, fics directoralison maynardfics senior management team

fics initiative alison maynard

wednesday 7 march 2007 – day 2

Day 2 started off with Members being given the opportunity to say what is right and what they

felt was wrong with fics’ processes.

topic/title presenters

what’s right with fics and what’s wrong with fics – interactive in-the-round session

facilitated by nina harding, mediator, lawyer and adr practitioner assisted by trevor slater, national relations, manager, fics

what do complainants really want (see page 35 for more)

ralph simpfendorfer, managing director, tmi australia

a strategic approach to complaints handling – crafting the business case (see page 39 for more)

nina harding, mediator, lawyer and adr, practitioner

don’t bitch – just get rich toney fitzgerald, author and corporate coach

35

ralph simpfendorfer

managing director tmi australia

tmi are a global network of change

consultancies who have undertaken extensive

research in the area of complaints and

complainants’ needs.

As part of the tmi-socap Complaints Culture

Survey National Report 2005, 3,245 people

from 25 organisations were asked a series of

questions. Following is a selection of those

questions and answers.

when you don’t complain, what are your reasons?

Lack of time 48%

Too much trouble 50%

Way that the organisation may

penalise me 6%

Why bother, the organisation won’t

do anything 33%

Afraid I will be treated rudely 6%

The organization will ask too may questions 3%

They will try to blame me 7%

No one will listen to me 13%

I don’t know who to complain to 13%

I’ll just sent on a wild goose chase 25%

Other 7%

if you make a complaint in person, how quickly do

you expect the complaint to be dealt with?

Immediately 29%

The same day 27%

Within 2-3 days 28%

A week 11%

Over a week 2%

Empty Responses 3%

if you make a complaint over the phone, how soon

do you expect the complaint to be dealt with?

Immediately 15%

The same day 31%

Within 2-3 days 36%

A week 13%

Over a week 3%

Empty responses 2%

if you make a complaint in writing, how quickly

do you expect the complaint to be addressed?

Within 1 week 48%

Within 2 weeks 41%

Within 1 month 9%

Not sure 2%

when you have a choice of how to make a

complaint, which method do you prefer?

In person 32%

Telephone 43%

Letter 10%

E-mail/internet 14%

Other 1%

do you think that the organisations that you

deal with encourage you to complain?

Never 21%

Rarely 45%

Sometimes 27%

Most of the time 6%

Always 1%

if your complaint has been handled well, how

likely are you to repurchase from that company?

Not likely at all 5%

Quite likely 38%

Very likely 50%

It does not affect my purchasing decision 7%

if you have a good experience with a company,

how likely are you to tell others?


Quite likely 30%

Very likely 67%

Not sure 1%

if you have a bad experience with a company, how

likely are you to tell/warn others?


Quite likely 16%

Very likely 79%

Not sure 2%

“what do complainants really want?”by ralph simpfendorfer, managing director, tmi australia

36

bill dee

standards australia

Bill Dee, Director, Compliance and

Complaints Advisory Services Pty Ltd,

Convener of the Committee that drafted

as iso 10 002, and author of the Standard

Handbook “The How and Why of

Complaints Handling”..

A good idr process should follow the guiding

principles of the Australian Standard of

Complaints Handling (as iso 10 002):

visibility

• Prominent phone number, mailing address,

email address on all materials (brochures,

handouts, PDFs etc) and at all points of

contact (websites, business cards, phone

books etc)

• Ensure all front line staff are aware of

complaint handling procedures and

relevant contact people

accessibility

• Should be flexible in how you receive a

complaint (i.e. in writing, via email,

orally etc)

• Customers should have easy access

to the complaint handling process and

information about the process

• Opportunity for toll-free or local call

facilities for making complaints

• Opportunity for making complaints

outside business hours (i.e. via email or by

accessing a website etc)

• The complaint handling process should be

easy to understand and easy to use

• Access to interpreters or other support

services for complainants with special needs

responsiveness

• All complaints should be acknowledged

immediately after receipt

• Challenging but realistic timeframes for

responding should be set

• Complaints should be assessed initially

and addressed in according to their

urgency

• Complainants should be kept informed of

the progress of their complaint throughout

the complaint handling process

objectivity

• Complaints should be considered on

their merit

• Separate the people from the problem

(don’t assign blame)

• Due weight should be given to both parties

to the complaint

• Consider the complaint from a ‘third

person’ perspective (looking from the

outside – in)

customer focused approach

• Be open to feedback including complaints

• Show commitment to resolving complaints

• Have a clear set of values of the

organisation and its role, freely available to

the public

• Have management and staff actively

implementing the values

accountability

• Have a current reporting system for all

complaints, which tracks compliance risks

and breaches

• Include analysis of complaint data for

improvement initiatives

• Process for reporting back, the

implementation or correction of identified

systemic issues or areas for improvement

charges and confidentiality

• The complaints handling process should

be a free service to the complainant

• Any information which identifies the

individuals involved in a complaint should

only be used for the purpose of addressing

the complaint within the organisation

and should be actively protected from

disclosure

continual improvement

• Complaints are an opportunity to improve

your business

• Feedback and complaints allow an

organisation to identify shortfalls in

service, process and information

• Corrective action should be taken to

improve inadequacies in an organisation

guiding principles of as iso 10 002by bill dee, standards australia

37

james thomson

standards australia

HappyDollars is a financial planning company

that is run by Harry Happy, a planner with

good reputation for his knowledge of

investment markets. Harry has been in the

financial services business for three decades

and realises that to stay financially viable

his firm has had to start charging for time

spent on developing plans and researching

investment products.

Harry has recently hired a young and

enthusiastic planner called Ben Brightfellow.

Peter Playboy has just turned 55. His lifestyle

has been based on the philosophy of party

today pay tomorrow – so he has no substantial

asset bases, just substantial debt. He has

realised that retirement is only 10 years away

and so decides that he should start thinking

about how he is going to prepare for this. He

reads an advertisement in the local paper

about a retirement seminar run by a company

called HappyDollars. The advertisements

states that the seminar is free but the

HappyDollars has a seminar special offer –

an adviser from HappyDollars will assess and

individual’s financial situation and provide

advice on a range of investment options for

wealth building for a special fee of $220.

Peter thinks that this is a good deal and

registers for the seminar and pays the $220

for the consultation. He attends the seminar

in October and receives a shock when he

realises how much money he will need to

retire comfortably on. Peter meets with Ben

Brightfellow and they discuss his financial

situation. Ben states that given the severity of

Peter’s financial affairs, he will have to spend

more time to research investment options and

hence there will be a delay.

When Peter does not hear from Ben for over

a month, he calls to see how the research on

the investment options is progressing. Ben

tells Peter that he will get on to it. Two weeks

later Peter receives a letter from Ben along

with brochures on a number of investment

products. Ben states in his letter that he has

assessed Harry’s situation and believes that

the enclosed investment products should be

considered by him.

To Peter’s horror there is a bill for $2,200 from

HappyDollars.

Peter Writes back to Ben:

“On 12 December I received your letter

inclosing brochures on investment products

and your invoice for $2,200. As far as I am

concerned I paid $220 prior to the seminar and

have not asked you to do any more work than

was promised in your advertisement. I intend

to take this matter further unless you withdraw

your invoice”

discussion: is this a complaint under as iso 10 002?

The key ingredients of a complaint per as iso

10 002 are:

element 1: expression of dissatisfaction made

to an organization, related to its products (or

service), or the complaints-handling process

itself.

element 2: where a response or resolution is

explicitly or implicitly expected

There is clearly an expression of

dissatisfaction, but is asking Harry to withdraw

the invoice an expected response?

Harry responds to Peter’s letter on 5 March:

“I have reviewed your situation with our Ben

Brightfellow and believe that we have acted

appropriately. As you would appreciate, you

are in a dire financial situation and as such we

had to do far more research that expected.

Please organise for the prompt payment of the

bill within 14 days or else we will commence

recovery action.”

issues relating to as iso 10 002, the standard for complaints handling – a fictional case studypresentation by james thomson, project manager, commerce, standards australia,

with bill dee, chair committee mb-015 customer satisfaction, and trevor slater, national relations manager, fics

38

discussion: is this how harry should have handled this?

Under as iso 10 002, Harry should have

written back to Peter immediately to

acknowledge his letter, not waited nearly

three months.

Harry also should have immediately opened

a complaint file with a unique ID number and

tracked the progress of the complaint.

As Harry is a fics member, Peter writes

to fics explaining the situation. fics then

corresponds with Harry, asking for an

explanation. Harry writes to fics and argues

that the issue is outside of fics’ jurisdiction as

it relates to an issue of fee level.

discussion: what is fics’ response to this and how

would fics offer in terms of resolving

this dispute?

The issue is really non-disclosure of fees,

rather than level of fees, so it is within fics’

jurisdiction.

fics would look at holding a Conciliation

Conference between Harry and Peter to try

and generate some resolution options that

would satisfy both parties.

After correspondence with fics, Harry

decides to call a meeting with Peter to resolve

the issue himself, rather than via a fics

Conciliation Conference. At this meeting,

Peter still refuses to pay the invoice and Harry

realises that if he can keep Peter as a client for

the next 10-20 years, then he will make more in

commissions and fees than $2,200 in question.

Harry agrees to write off the invoice.

discussion: is this a satisfactory resolution?

On the one hand, it is satisfactory because

both parties agree to a particular resolution.

However, this option is rather one-

sided in favour of Peter. If both parties

had participated in a fics Conciliation

Conference, possible resolution options that

would satisfy both parties may have included:

• having Peter agreeing to pay a reduced

invoice, or

• both of them agreeing for Peter to not pay

the invoice until a later date, once he could

see how the financial plan was performing.

This hypothetical is in no way a statement

about financial planners either individually or

the profession as a whole. The characters in

this case study are fictional and the following

people are acknowledged for their assistance

in its preparation:

David Williams,

Chair Committee OB-015 Personal

Financial Planning

Bill Dee,

Chair Committee MB-015 Customer

Satisfaction

Trevor Slater,

National Relations Manager, fics

39

nina harding

nina harding mediation services pty ltd

Nina Harding is a Dispute Resolution

Expert, a Harvard Law School trained

Mediator and holds a Master of Laws. Nina

teaches Complaints Handling at university

post-grad level and teaches the popular

Avoiding Complaints workshops with fics.

www.ninaharding.com

It is time to adopt a strategic approach to complaints handling. Companies need to appreciate the cost of complaints and how good complaint handling can lead to improved profits and more resilient customers.

reasons to invest in complaints handling

• to meet compliance requirements (asic and fics)

• a reputation for good complaints handling will provide a competitive edge

• customer retention and engagement (88% will repurchase if their complaint was handled well)

• avoid the risk and cost of third party involvement (fics, litigation, media)

• Members can use the feedback to improve products and services

• to protect your companies brand and goodwill.

learn from your complaints

It isn’t enough to have a good complaint handling process in place. Almost as important is a

company’s ability to learn from the complaints they receive.

Companies spend large amounts of money each year trying to understand the needs of their

customers. The data collected by companies from customers with a complaint is, effectively, free

market research. It is also some of the most frank and honest feedback you will ever receive.

The new Australian Complaints Handling Standard as iso 10002 requires companies to collect

data about complaints to identify systemic issues. Some companies use their complaint data to

identify the ‘root cause’ of complaints.

a strategic approach to complaints handlingby nina harding, nina harding mediation services pty ltd

40

root cause analysis

Root cause analysis can be described as a

structured process which is used to identify

and remedy the real underlying cause of the

problems.* If the underlying cause of the

complaint is not resolved more complaints will

arise in the future.

There are real costs attached to complaints

both tangible and intangible. It has been

estimated that 88% of businesses do not know

the real cost of conflict resolution to their

organisations.

* Taken from “Root Cause Analysis: The New Frontier for Complaint Handling” by Bill Dee and Nicole Cullen, socap Consumer Directions, Dec 2006 pp13-15.

cost of complaints

Companies should pay attention to the cost

of complaints as they travel through their

organisation. This can show, not surprisingly,

that if complaints were resolved at the first

point of contact the resolution would cost the

company less.

Many companies are now recognising this and

investing more in their call centres (frontline

response). As time elapses complaints

become more expensive to resolve and often

the substance or nature of the complaint

changes and becomes more complex to

resolve. A simple exercise is to work out your

companies per complaint cost.

factors:

How many complaints do we receive each

year? (cn)

What is the cost of our complaints department

per annum? (cc)

What is the cost of external dispute resolution

per annum? (edrc)

eg. (edrc + cc) divided by cn = the simple

cost per complaint.

This isn’t a very accurate measure as it doesn’t

include the intangible costs associated with

complaint handling, such as, lost management

time, the cost of the call centre and the cost of

lost opportunities.

However, it can be persuasive. For instance if

your company receives 2,000 complaints per

year and the complaints handling department

cost was $1m and the cost of edr was $2.2m

then the cost per complaint on average is:

($2.2m + $1m) ÷ 2000 = $1,600 per complaint.

what would your per complaint figure be?

To reduce these costs, you need to get to the

root cause of your complaints. Log data about

your complaints that is specific enough to

allow you to conduct meaningful analysis so

that your organisation can learn from it.

Analyse the data that you have logged to

determine:

• the extent to which complaints of that

type can be eliminated

• the department or division that will take

ultimate responsibility for ensuring the root

cause has been addressed and resolved

• how satisfied the customer was with the

process undertaken.

conclusions

There is a cost of complaints to your

organisation that you should identify and

quantify. You can change the way management

sees complaints and the importance of their

resolution by doing the following:

• collect meaningful data

• budget more effectively for

complaint handling

• provide clear complaint handling

targets for staff

• reward and recognise good performance

• show complaint handling as profit centre

and not loss centre

• identify and prevent preventable

problems

• identify systemic issues

• link good complaints handling to

customer retention

• get buy-in from the hierarchy.

41

Many complaints that come to fics are resolved by our Case Managers through a negotiated settlement or a Conciliation Conference. In fact only around 16% of complaints received in 2007 needed to be resolved by the Panel or Adjudicator.

The following case studies come from the different areas in fics, demonstrating how a complaint may be resolved at different stages of the fics process.

Please note that these case studies have been edited/modified for brevity and to focus in on issues of interest. Full versions of most fics determinations and adjudications can be found at www.fics.asn.au

cases in 2007

42

life insurance

Mr R passed away in June 2006, aged 72. Mrs R made a claim under her late husband’s life

insurance policy held with BBB Insurance. BBB Insurance denied the claim on the basis that the

policy had expired upon Mr R’s 70th birthday, noting that no premiums had been deducted since

that time.

Mrs R wrote a letter of complaint to BBB Insurance, alleging that she and her husband had never

been informed that the policy would expire upon Mr R reaching 70 years of age and they had not

received any correspondence from them to advise that the policy had expired. She alleged that

she was not aware that the policy had an expiry date until the claim was declined.

To resolve the complaint, Mrs R was seeking that the claim be accepted and the benefit of $30,000

be paid or a refund of $8,100 for the total amount of premiums paid under the policy.

In its response to the letter of complaint, BBB Insurance advised Mrs R that Mr R had been aware

of the cessation date of the policy because he had previously telephoned BBB Insurance to

query why premiums were not being deducted and had been advised of the terms of his policy

and the expiry date during these conversations.

Mrs R subsequently lodged her complaint with fics. In its response to fics, BBB Insurance

explained that the terms of the policy, including the expiry date, had been disclosed in the

Certificate of Membership provided at policy commencement. They also provided file notes of

telephone conversations between themselves and Mr R. Mrs R disputed that such telephone

conversations took place.

After investigating the complaint and reviewing the information provided by both parties, the

fics Case Manager wrote to Mrs R, advising that the available information indicated that the

Certificate of Membership outlining the expiry date appeared to have been provided to Mr R

when the policy commenced, and that Mr R appeared to have been previously aware that his

policy would expire upon him reaching 70 years of age.

After further discussions between Mrs R, the fics Case Manager and BBB Insurance, the

member made an ex-gratia customer service offer of $2,700 to Mrs R to assist in resolving the

complaint. This represented the total legal fees incurred by Mrs R. Mrs R accepted this offer as

full resolution of her complaint.

Y Both parties were satisfied with this resolution.

financial planning

Mr H sought property investment advice from Mr R, a financial adviser employed by Y Financial

Planning. Mr R recommended a number of properties to Mr H and outlined some financing

options in a Statement of Advice (soa). He also provided Mr H with a Financial Service Guide

(fsg) outlining the fee schedule charged by Y Financial Planning. The soa also disclosed the fees

payable should Mr H proceed with any of the recommendations. Mr H subsequently purchased

one of the recommended properties through a credit facility that was set up by Mr R. Once the

sale was settled, Mr H received a tax invoice from Y Financial Planning that was for more than

he expected. He wrote to Y Financial Planning expressing his disagreement, but later paid the

invoice to avoid debt collection.

Mr H lodged a complaint with fics, alleging that the information about fees in the soa and fsg

was inconsistent and unreliable.

The fics Case Manager sought a submission from Y Financial Planning and copies of the

documentation provided to Mr H that disclosed the fees. After assessing the information

provided by both parties, the Case Manager advised Y Financial Planning that the fees on the

tax invoice did not appear to correspond with either the soa or the fsg. Y Financial Planning

subsequently acknowledged that the fsg supplied by Mr R was out of date and had outlined a

previous fee schedule.

After some negotiations, Y Financial Planning agreed to refund a portion of the fees paid by

Mr H, amounting to $5,000.


complaints resolved by case management

43

stockbroking

Mr and Mrs D wanted to trade securities. They telephoned X Securities and then later that

day, went into the X Securities office and opened a domestic broking account. After using it

for a couple of months, they decided to open another broking account for overseas securities.

Later that month when reconciling their accounts, they noticed that the brokerage they had

been charged was more than they had expected. They raised this with X Securities in a letter of

complaint.

X Securities responded by advising that part of the fees charged had been counter party charges,

which had been disclosed in a Financial Services Guide (fsg) sent to Mr and Mrs D by email after

their initial telephone enquiry. It had also been sent to them again after their second account

was opened. X Securities also believed the charges had been discussed verbally on a number of

occasions.

The complaint was subsequently sent to fics. The fics Case Manager reviewed the submissions

of both parties. After some initial correspondence between the parties to clarify some details,

the Case Manager assessed that the second fsg had been received by Mr and Mrs D, but the

events prior to that remained in dispute and it was difficult to reconcile both versions of events,

given the conflicting information available.

The Case Manager subsequently suggested that a Conciliation Conference may be a beneficial

way to discuss the disputed events.

Prior to the Conciliation Conference, X Securities made an ex-gratia offer to Mr and Mrs D, being

a full refund of the counter party charges that Mr and Mrs D had been charged, prior to them

receiving the second fsg.


managed investments

Mr and Mrs S were invested in K Managed Funds. Mr and Mrs S made a partial withdrawal of

their funds on the 30th of October 2006 and had a complaint about the calculation of income on

the withdrawal. Mr and Mrs S alleged that the redemption amount they were paid did not include

any earnings for the period. Mr and Mrs S believed that they should be paid income for the 30

days they were invested in the fund.

K Managed Funds advised Mr and Mrs S that according to the terms and conditions of the fund,

to be entitled to a distribution, an investment needed to be in the fund on the last day of the

distribution period, which in this case was the 31st of October 2006.

K Managed Funds was unable to resolve the complaint directly with Mr and Mrs S and they

subsequently lodged a complaint with fics.

After receiving a complaint submission from K Managed Funds, the Case Manager reviewed

the submissions of both parties and all of the available documentation including the terms and

conditions of the fund.

The Case Manager then contacted Mr and Mrs S and advised that it appeared that K Managed

Funds had acted in accordance with the terms and conditions of the fund, and in order to

be entitled to receive any income Mr and Mrs S needed to be invested in the fund as at the

distribution date. These conditions had been disclosed to Mr and Mrs S prior to them investing in

the fund.

Mr and Mrs S subsequently accepted the Case Manager’s assessment.


44

life insurance

Mrs L had a life insurance trauma policy with J Insurance. In January 2003, while she was at

work, Mrs L suffered an injury to her shoulder. The pain and trauma of her injury led to Mrs L

developing post traumatic stress disorder and depression. Mrs L had not been able to work

because of her symptoms and therefore made a claim on her insurance policy for major trauma.

Mrs L believed that she qualified for the policy benefit on the grounds of being unable to attend

to the ‘Activities of Daily Living’, due to requiring a significant amount of daily assistance. Mrs L

sought payment of the policy benefit, an amount of $109,432.

J Insurance denied Mrs L’s claim, advising her that while it acknowledged she had suffered an

injury and a secondary depressive condition, it did not believe that the major trauma benefit

was payable. Mrs L had applied for the benefit on the grounds of not being able to attend to the

‘Activities of Daily Living’. However, to be eligible for the benefit, the policy terms required her to

demonstrate that she was ‘permanently unable’ to undertake ‘at least five of ten’ activities of daily

living. Mrs L was unable to independently undertake two of the ten activities, but it was not clear

whether this inability was permanent or temporary. Because of this, J Insurance did not believe

that Mrs L was eligible for the major trauma benefit under her policy.

Mrs L was dissatisfied with this and lodged a complaint with fics. A Conciliation Conference was

subsequently organised by fics.

In the Conciliation Conference, Mrs L’s representative contended that the medical evidence

being relied on by J Insurance was outdated. It was agreed by both parties that Mrs L would

undergo fresh assessment by a psychiatrist and an orthopedic surgeon. J Insurance arranged

these appointments at its expense.

After receiving the assessments, J Insurance advised that while it believed the medical

evidence was somewhat inconclusive, on balance, it agreed that the medical evidence

supported Mrs L’s claim.

Y Accordingly, the Member agreed to pay Mrs L’s claim of $109,432.

complaints resolved by conciliation conference

45

financial planning

Mrs T wished to complain about D Financial Planning, which had provided financial advice to her

now-deceased mother-in-law. In 1997, a representative of D Financial Planning advised Mrs T’s

mother-in-law to purchase two sets of bank notes for $8,500. At the time of the investment, Mrs

T’s mother-in-law was provided with a research note by D Financial Planning which stated that

the seller guaranteed the re-purchase of all banknote sets originally sold by them; that the notes

would produce good capital growth; and that special prices were offered to clients of D Financial

Planning. Mrs T noted that a special price of $4,000 per set had been offered to clients of the

Member, so she had been over-charged by $500.

In 2006, Mrs T had made enquiries about selling the bank notes, but had discovered that their

value had dropped to between $1,000 and $2,000. Mrs T had since been advised that when

certain regulations had changed, D Financial Planning had recommended its clients sell their bank

notes and invest in pre-paid bonds. This had resulted in a flooding of the market with the bank

note sets and the devaluation to occur. Mrs T did not believe that the advice to invest in the bank

notes was appropriate and felt that D Financial Planning had a moral responsibility to ensure that

its actions didn’t adversely affect its clients – whether or not they were current clients.

Mrs T was seeking for D Financial Planning to compensate for the devaluation of the bank notes,

an amount she estimated to be $18,000, plus refund the overcharged $500.

D Financial Planning acknowledged that Mrs T’s mother-in-law had paid $500 too much for the

two sets of bank notes and offered to refund this amount, together with an additional $315

in interest. D Financial Planning also noted that the guarantee made by the seller of the bank

notes was to re-purchase the notes, but it was never promised that the notes would be bought

at the original purchase price. D Financial Planning referred to the financial plan provided to

Mrs T’s mother-in-law, which stated that it did not guarantee the repayment of capital or any

particular rate of return. Therefore, D Financial Planning believed that Mrs T’s mother-in-law had

understood that the future performance of the notes could not be guaranteed.

D Financial Planning’s offer did not resolve the complaint and Mrs T lodged a complaint with fics.

A Conciliation Conference was subsequently organised by fics.

In the Conciliation Conference, D Financial Planning stated that it could not be held responsible

for changes in the regulations and denied that its actions had been the cause of the devaluation of

the bank note sets. D Financial Planning noted that it had a duty of care to its current clients and to

advise them not to sell their bank notes would have been a breach of that duty. They also believed

that the advice to Mrs T’s mother-in-law to purchase the bank notes had been appropriate at that

time, notwithstanding that circumstances had subsequently changed. Mrs T’s mother-in-law had

also not been a client of D Financial Planning when the regulations had changed.

Mrs T acknowledged what D Financial Planning had advised, but she still had concerns about the

appropriateness of the original advice and believed that D Financial Planning had an obligation to

stand by its original advice and protect the interests of its clients, both current and former. She

felt that her family had not been well-treated by them and was seeking an outcome that would

acknowledge this.

Y After discussion of these issues in the Conciliation Conference, D Financial Planning agreed

to make Mrs T an ex-gratia payment of $3,800. Both parties were satisfied with this outcome.

46

stockbroking

Mr P purchased a number of shares in L Corporation for his wife before the breakdown of their

marriage. The shares were in Mrs P’s name, but the purchase had been organised and paid for by

Mr P through W Financial Services.

After the breakdown of Mr and Mrs P’s marriage, Mr P sold Mrs P’s shares through W Financial

Services. Mrs P did not become aware of this until two years after the event, when she was

cleaning out her garage and found the relevant share and sale documents concealed in a paint tin.

Mrs P contacted W Financial Services to complain about her shares being sold without her

consent, but was not able to resolve the issue with. Mrs P then lodged a complaint with fics.

Both parties agreed to attend a Conciliation Conference where Mrs P queried why W Financial

Services had assisted her husband in selling shares that were in her name, and advised that

although only Mr P had dealt with the shares, legal ownership was in her name. Due to the

passing of time and the departure of the relevant staff member, W Financial Services was unable

to provide specific information about the transaction.

Several possible remedies were discussed by the parties over the course of the Conciliation

Conference, including the option of the shares being re-purchased. It was subsequently agreed

that W Financial Services would pay Mrs P $8,000 – being the value of the shares at the time she

discovered that they had been sold.


managed investments (timeshare)

Ms F and Mr K attended a seminar conducted by H Holidays, a holiday timeshare organisation,

after being told that they had won a holiday and could collect it if they attended a presentation.

After the presentation they had a private consultation with a sales consultant of H Holidays. They

subsequently took out a membership with H Holidays, but then sought unsuccessfully to cancel

their membership the following day.

Ms F and Mr K were unable to resolve their complaint directly with H Holidays and lodged a

complaint with fics.

A Conciliation Conference was subsequently organised by fics where Ms F and Mr K explained

that they had felt overwhelmed by the volume of material shown to them and that they had felt

pressured by the salesperson who told them that a discount price was available but only if they

signed up on the spot. They signed up and took advantage of the financing offer that was also

available. They then decided that evening that they wished to cancel. When they called the next

day to do so, they were told that they had signed a contract, and were now obliged to provide

their bank details.

In response, H Holidays advised that this was not in line with its staff training and protocols, and

explained that information about its cooling off period was available in the provided paperwork.

Ms F and Mr J advised that after they were unable to cancel their membership, when they

attempted to use their membership, they found that the advertised specials did not cover any of

the holidays they wished to take, and that no vacancies were available at the time they wished

to holiday. H Holidays advised that most holiday specials come with terms and conditions

attached, and that these were indicated in the material provided. H Holidays also explained that

the Product Disclosure Statement (PDS) provided the information necessary to make a decision

about purchasing a membership, and that Ms F and Mr K had signed and acknowledged receipt

of their PDS.

As a result of conciliation, Ms F and Mr K’s membership with H Holidays was cancelled. They

received a partial refund and their existing membership points were used to book them a holiday.


47

financial planning

(issue – inappropriate advice)

This dispute arose from Mr B in relationto

financial planning advice given by Mr T, the

authorised representative of a financial planner.

On Mr T’s recommendation Mr B invested

$50,000 into DD Pty Ltd (a company that

provided mezzanine finance to the Westpoint

group) by way of a promissory note on 29 July

2004. The promissory note had an issue date

of 8 August 2004 and an expiry date of 21

November 2005. According to its terms, the

note was non-negotiable and non-transferable.

Mr B’s money amongst other investor funds

was on-lent to Westpoint for the development

of a property site in Sydney’s cbd.

DD Pty Ltd was placed in administration

in November 2005 and was subsequently

wound-up on 17 December 2005.

Mr B had sought compensation for his losses

from Mr T without success, so he brought his

complaint to fics.

Mr B alleged that Mr T provided investment

advice that was not appropriate for his needs

or objectives. Mr B noted that a Statement

of Advice (soa) was not provided prior to

the investment proceeding and that he was

pressured into making the investment by Mr T

and assured of its risk by assertions regarding

Mr T’s professional indemnity insurance.

His claim against the Member was for losses

arising from the failure of DD Pty Ltd. Mr

B indicated that had he seen the soa and

the research (which was two years old), he

would have insisted on an updated research

summary before placing the investment.

Mr T denied liability for Mr B’s losses on the

basis that the Westpoint collapse was from

external circumstances which could not be

blamed on any financial adviser or licensee.

Mr T asserted a soa was prepared for Mr B

which was properly researched and based on

favourable research reports prompting the

investment to be included on the Member’s

approved product list. He further submitted

that he and Mr B had both agreed on the

low risk of the investment, described as

‘entrepreneurial’ before the recommendation

was accepted by Mr B.

In making its determination the fics Panel

noted that Mr T was a professional adviser in

this dispute who was expected to be trained

and have an understanding of the basic

concepts of duty of care and understand

its obligations under the Corporations Act

2001. The Panel found that the promissory

notes taken by Mr B were akin to a second

mortgage at best and such mezzanine funding

is high risk and can result in the loss of capital

if unsuccessful. Despite warnings about the

possible loss of capital, the investment was

presented by Mr T as possessing the trappings

of a secure and safe investment. There was no

indication that Mr B had been informed that

all his capital could be lost.

The investment may have been fixed interest

with respect to providing a regular interest

payment, but it was not a fixed interest

investment with respect to all other attributes

that many believe ‘fixed interest investments’

generally posses.

The Panel noted that it is the nature of building

projects that the collective security value

at any time during the construction phase

may not in any way resemble the amount

invested. They said this concept should be

incorporated into the construction of fixed

interest portfolios by financial planners. It

was not done in this instance and the Panel

doubted that Mr T understood the true risk

nature of the investment or the particular risks

attached to DD Pty Ltd because of his failure

to adequately research the investment prior

to its being made. Accordingly Mr T was not

in a position to assess its appropriateness for

the complainant’s needs and objectives or

properly advise him.

Mr T then compounded the situation by not

providing the complainant with an soa prior to

the investment being made (the soa provided

by Mr T to the Panel carried the date 2 August

2004 when the investment was made in July

of that year). The investment was illiquid and,

as a consequence of Mr T’s failure to provide

the soa, Mr B did not have the option of

withdrawing from the investment before it was

made if he felt he needed to.

The Panel noted that what was not considered

by Mr T was that the complaint was not

in relation to why Westpoint failed but

rather was a complaint in relation to the

appropriateness of the services and financial

planning advice provided by Mr T and whether

he had a reasonable basis for recommending

the investment in DD Pty Ltd.

Y The Panel found that Mr T’s failure to meet

his obligations to the complainant under

the Corporations Act 2001 was the direct

cause of Mr B’s loss.

The Panel was satisfied that Mr B showed

some haste in providing funds for the

investment prior to the receipt of the soa

and research material. The Panel was

satisfied that Mr B should be found to be

10% responsible for his loss by virtue of his

contributory negligence.

complaints resolved by the panel/adjudicator

48

Hence the Panel determined that the

member pay the complainant Mr B the sum

of $45,000 (i.e. $50,000 less 10%).

The Panel decided that Mr B, upon

payment of this compensation, should

assign to Mr T all his rights, title and

interest in his entitlements to the proceeds

from the liquidation DD Pty Ltd so there

could be no double recovery.

life insurance (issues – reduced benefits, cancelling

the policy, partial disability benefits)

Mr C applied to RR Insurance for an income

protection policy on 11 July 2002. RR

Insurance accepted the application and cover

commenced on 15 August 2002. The policy

provided for a weekly benefit during any period

of total disability arising from injury or sickness.

The benefit period was 24 months and the

amount of the weekly benefit was the lower

of the amount specified in the policy schedule

(initially $600) or 75% of the complainant’s pre-

disability income, subject to indexation. Mr C’s

occupation was specified in the application as

“Bobcat operator tree lopper”.

On 17 June 2004 Mr C made a claim against

his policy relating to a fractured femur.

The claim was accepted by RR Insurance

and total disability benefits commenced.

RR insurance then wrote a letter to Mr C

on 20 September 2004 stating that it had

reviewed financial information in relation

to Mr C and formed the opinion that Mr C

had misrepresented his income at the time

of completing his application form. On the

basis of the correct income of Mr C at the

relevant time (calculations were provided), RR

Insurance would only have offered him cover

of $300 per week. RR Insurance noted that

it had referred the matter to its underwriting

department and explained that had they had

accurate information, the sum insured would

have been a maximum of $400 a week. They

concluded by saying that RR Insurance wanted

to continue to pay his claim at the lower rate

as long as he kept satisfying the total disability

definition and other conditions of the policy.

Mr C responded by letter asking RR

Insurance to reconsider his claim, disputing

the calculation of the benefit. RR Insurance

replied by fax dated 7 October 2004 and while

it did not expressly state that it had confirmed

its earlier decision, the fax provided the

contact details for fics. Mr C subsequently

brought his complaint to fics.

RR Insurance confirmed its position in relation

to the complaint to fics, stating in a letter

that had the proper financial information

been provided, they would not have entered

into the contract of life insurance with Mr C

for the benefit amount for which he applied.

In light of the misrepresentation, pursuant

to section 29(4) of the Insurance Contracts

Act 1984 (‘the Act’), RR Insurance wanted to

reduce the benefit. They added that while

Mr C had declared that he had checked

that the information in his application form

was accurate and complete, RR Insurance

concluded that Mr C had considerably

overstated his income.

The complaint was referred to the fics

Conciliation Team for a possible conciliation

conference between the parties. However,

prior to this occurring, another letter to Mr C

from RR Insurance emerged dated 3 February

2005, purporting to cancel the claim with

retrospective effect from 14 December 2004

due to an alleged breach of the duty of good

faith by the complainant. The letter alleged

that contrary to progress claim forms (‘PCFs’)

completed by Mr C, he had in fact returned to

his occupational duties prior to 14 December

2004. The letter said that RR Insurance

believed that Mr C had breached his duty of

good faith owed to them and under section 56

of the Insurance Contracts Act, the claim will

be closed with effect from 14 December 2004.

fics wrote to the parties on 23 August 2005

and sought to clarify the matters in dispute.

One of the questions posed to Mr C in regard

to the letter of 3 February 2005 was whether

he disagreed with RR Insurance’s decision. If

he did disagree, the letter went on to ask him

to detail the reasons for his disagreement.

It also asked a number of other questions

in regard to whether he did perform his

occupational duties prior to 14 December

2004 and if so, for instance, what duties he

performed and the dates between which he

performed such duties.

Mr C did not respond to fics until 14 October

2005. Prior to that time RR Insurance had

also responded to the letter sent by the

Panel Case Manager dated 9 September

2005. In commenting upon whether Mr C

misrepresented or non-disclosed his true

income on his application form, RR Insurance

said that under section 21 of the Act, an

insured person has a duty to disclose all

matters that they, or a reasonable person,

could be expected to know are relevant to

the decision of an insurer to accept the risk

and on what terms. RR Insurance said that

as Mr C misrepresented his income on the

insurance application, that this showed a clear

failure to comply with that duty. RR Insurance

contended that Mr C knew or should have

49

known that the income he disclosed on his

application was incorrect. RR Insurance

went on to confirm that it would be prepared

to refund to Mr C any amounts of overpaid

premiums that he had previously paid. In

this regard it attached a calculation which

indicated that the complainant would be

entitled to a total premium refund at the

date of the letter of $1,100. fics received

a response to this on Mr C’s behalf from his

adviser Mr D on dated 14 October 2005.

Mr D took the opportunity to comment on

RR Insurance’s submission of 9 September

2005, saying that Mr C had innocently

misrepresented his income on the application

form and, to the best of his knowledge, gave

the most accurate details he could. Hence

section 29(4) is irrelevant as RR Insurance

were receiving a fair premium for monthly

benefits as stated in the insurance contract.

The letter also confirmed that Mr C wished to

include within his complaint the matter relating

to the finalisation of his claim. Mr D confirmed

that Mr C had not performed his occupational

duties prior to 14 December 2004 and his

medical specialist had informed him that he

would never work in his occupation again as

a tree lopper. He then commented that Mr C

had performed other duties in connection with

his business because his doctor suggested he

do some minor light duties for rehabilitation

purposes. These included sitting in a bobcat

and driving a truck on occasions for “for

training and rehabilitation purposes only”

because since his injury he had to employ

someone to do his work. Mr D also maintained

that Mr C should have been paid a partial

disability benefit subsequent to 14 December

2004, stating that since that date, Mr C had

only performed 50% of his bobcat work and

truck driving, and had performed no tree

lopping since this date. This was proposed as

being more than fair, asking only for partial

disability benefits, not full disability benefits.

fics sent a letter to both parties on 25

October 2005, putting them on notice as to

the additional issue of closing the claim under

section 56 of the Insurance Contracts Act 1984.

RR Insurance responded to fics on 14

November 2005, summarising the history

of what Mr C had put in his claim forms,

illustrating inconsistencies between what Mr

C said and what he was actually doing.

RR Insurance then referred to the transcript

of a tape-recorded interview with Mr C on 11

January 2005 with an investigator engaged by

RR Insurance. The transcript revealed that Mr

C had been attending all sites with the new

employee, sometimes driving the bobcat and

truck, performing shoveling, lifting etc, and

that he had worked considerable hours over

October and November 2004. When asked

why he hadn’t added this info to his PCFs,

he said it was hard to write a clear concise

explanation of his work activity, adding that he

received no personal income from his work as

it was training rather than work.

RR Insurance then went on to say that

Mr C deliberately or recklessly gave false

answers in various PCFs and in his telephone

conversations with RR Insurance’s claims

assessors. Further, in accordance with the

total disability definition, a claimant is only

considered to be totally disabled if he or she

is not working any occupation (whether paid

or unpaid). RR Insurance added that Mr C

failed to disclose the true position regarding

his activities in his answers on the PCFs and

in response to direct questions by claims

assessors.

RR Insurance then proceeded to consider

section 56 of the Act and the case law relevant

to the application of that provision, including

Tyndall Life Insurance Co Ltd v Chisholm

(1999) SASC 445, Bringinshaw v Briginshaw

(1938) 60 CLR 336, Muggleston v National

Mutual Life Association of Australia Ltd

(2004 NSWSC 913, NRG Victory Australia

Limited v Hudson (2003) WASCA 291 and

Neat Holdings Pty Ltd v Karajan Holdings

Pty Ltd (1992) 110 ALR 449. RR Insurance

concluded that the evidence supported a

finding that Mr C had acted in a fraudulent

manner and accordingly RR Insurance was

entitled to cancel the claim in accordance with

section 56 of the Act.

So the complaint was effectively in two parts:

• RR Insurance reducing Mr C’s benefits

as they believed he had overstated his

income, and RR Insurance ending the

cover, and

• Mr C’s entitlement to total or partial

disability benefits during the period

commencing 6 January 2005 to

15 August 2006.

On the first issue, RR Insurance offered to

make a lump sum payment of $6,500 to Mr

C in full and final settlement of any claim for

benefits and interest for the period from

8 July 2004 to 6 January 2005 conditional

upon him agreeing to withdraw the portion

of his complaint to fics which related to the

calculation of benefits under the policy over

that period. Both parties signed a release to

this effect and RR Insurance paid the amount

specified in that release.

50

Clause 21 of Mr C’s policy provided that RR

Insurance may end the plan on each renewal

date of the policy. On 30 June 2006 RR

Insurance advised fics that it had reviewed Mr

C’s policy and decided not to renew it beyond

the renewal date 15 August 2006.

It followed from the settlement of the first part

of the dispute and RR Insurance’s decision to

end the plan or cover on its renewal date, that

the remaining issue was Mr C’s entitlements

to total or partial disability benefits during

the period commencing 6 January 2005 to

15 August 2006. With respect to that issue, the

threshold question was whether RR Insurance

was entitled to cancel the claim and decline to

pay any benefits for that period.

The Panel felt it was plain from the admissions

made by the complainant in the course of the

interview with RR Insurance’s investigator that

he had in fact worked for significant periods

in respect of which he had completed PCFs,

stating he had not worked or returned to work.

The Panel has considered the explanations

given by Mr C that he was not receiving

payment for the work; rather the money

from the work was needed to pay business

expenses such as leasing payments on his

equipment and their car hire payments and

his medical and physiotherapy treatment

expenses. The Panel did not accept that any

those explanations can serve to overturn the

fact that the statements were simply false.

As for being unable to write concise

explanation of his work activity on PCFs, the

Panel was not persuaded by that explanation

particularly as the complainant admitted that

when telephoned by representatives of RR

Insurance and asked whether he had returned

to work, he simply answered no.

Y The Panel concluded that RR Insurance

had established that Mr C knowingly

made false statements in support of his

claim and that RR Insurance was entitled

to cancel the claim and to decline to make

any disability benefit payments beyond

6 January 2005.

stockbroking (issues – misrepresentation of account,

direct investment, account facility)

The complainant Ms H allegedly sustained

losses as the result of a poor stockbroking

service provided by V Investments to her. Ms

H alleged she received inappropriate advice,

misrepresentation and poor service with

respect to a direct investment account facility

used for trading shares. Ms H sought $11,325

plus interest, being the difference between

the highest prices at which she could have sold

the shares before her account was suspended,

and the lowest value the shares were when the

account was reinstated.

V Investments denied any liability to pay

compensation for the loss. The complaint

came to fics in June 2005.

The dispute was unable to be resolved at

case management level and so was escalated

to the fics Adjudicator. The Adjudicator

looked at the fiduciary nature of the broker-

investor relationship, as well as the rights of

action in contract law, the tort of negligence

and under statutory law. Accordingly, liability

for loss or damages may arise from common

law, breach of contract, breach of duty of

care, fiduciary duty or from the breach of a

statutory duty such as those provided under

the Corporations Act 2001.

Ms H claims that she was coerced into opening

a direct investment account that allowed her

to place orders for the purchase of shares

without having to deposit funds in a trading

account beforehand. This type of account

offered an attractive interest rate and did not

charge a monthly account keeping fee, though

overseas ATM transactions were $4 each.

Ms H claimed that the account did not earn

any interest over the 2-3 years it operated and

that she was charged for overseas withdrawals.

She also claimed that technical problems and

poor service resulted in losses due to her

frustration in making share trades. In addition

she claimed that she was prevented from

selling shares while in profit and only able

to sell them later when she made a loss. In

addition, she claimed she was unable to use

the overdraft facility to make trades.

fics determined that the only matters that

were within fics’ jurisdiction were the abc

and def shares.

V Investments provided a statutory

declaration on 12 October 2006 stating that

the direct investment account was not a loan

or overdraft facility and that V Investments do

not lend money to its customers.

V Investments added that they would have

sold shares anytime Ms H requested and

that they never prevented her from selling

shares. Ms H bought shares in abc and def

in January 2003, but the payment for the def

shares was dishonoured. They claimed that

Ms H bought shares, did not pay for them,

and then went overseas.

51

Subsequently V Investments withdrew

money for this trade from Ms H’s account

leaving $2,000 in debit. Then V Investments

suspended her account from trading to

prevent further debts being incurred. V

Investments did not know Ms H had gone

overseas but irrespectively, they would

have accepted her orders had she called.

V Investments stated that Ms H said she

did not call them as it would have used

the last of her cash.

V Investments added that Ms H chose to sell

her abc shares at a loss of her own free will.

The Adjudicator in his decision stated that

in order for Ms H’s claim to succeed she had

to establish on the balance of probabilities

against V Investments that she suffered direct

financial loss through their inability to use

reasonable diligence, care and skill.

Further, V Investments had an obligation to

do everything they can to make sure their

financial services are provided efficiently,

honestly and fairly; and that they comply

with the conditions on the licence. (This

reflected the principle authorised by Young

J, in Storey v NCSC (1988) 13 ACLR in which

he said that an adviser had to act “efficiently,

honestly and fairly”.)

The Adjudicator saw that the basis of Ms H’s

claim was that she suffered a direct loss as a

result of the denial of an opportunity to trade

shares in 2003. While she admitted there

was a problem with the full purchase of def

shares, she claims that V Investments denied

her the right to sell them. She also alleged that

V Investments denied her the right to sell any

abc shares while in profit, but said that she

could trade them after they had plunged 25%,

costing her $10,000 in lost profit.

The terms and conditions for V Investments’

direct investment account stated that account

holders should not allow the account to have

a debit balance and that V Investments are

authorised to debit the account with costs

associated with the account holder’s

dealings in securities through V Investments,

including brokerage, stamp duty and any

administration fees.

Given the above, the Adjudicator found that V

Investments was entitled to both suspend the

account and sell such shareholdings sufficient

to bring the account back to a zero balance.

Furthermore, the majority of the losses being

claimed by Ms H were as a result of her own

actions where she sold the shares for a loss.

She chose to sell at that time and at that price

and was under no time compulsion or external

impetus to do so.

Y The Adjudicator found that on the balance

of probabilities, V Investments bore

no liability to Ms H’s losses and so her

complaint was not upheld.

managed investments (issues – funds management, redemption

of units)

This complaint relates to money invested

by Mr and Mrs G (the complainants) in the

W fund, a managed investment scheme

that invested in residential and commercial

property, gaining revenue from rent on

properties owned and by developing and

selling properties.

Mr and Mrs G were members of a self managed

superannuation fund called the G Trust. On

6 September 2000, on the recommendation of

ppp Planning (which was also Mr and Mrs G’s

financial planner at the time), the G Trust applied

to invest $36,600 in the W fund. The application

was accepted and the money invested.

On 21 March 2001, the then trustee of the G

Trust made the first of a number of requests

to redeem the investment. After Mr and

Mrs G became trustees of the G Trust, they

made further such requests. They also made

a number of requests for information about

the fund, including governing documents and

annual statements.

In April 2003, fics received the current

complaint from Mr and Mrs G against ppp. The

complainants described their dissatisfaction

related primarily to:

• ppp’s failure to redeem the investment in

response to their requests (and failure to

provide a valid reason for not doing it),

• non-payment of any returns or dividends

in respect of the units, and

• failure to provide information and

documents relating to the trust.

Mr and Mrs G were unhappy and distrustful

of ppp and wanted their units in the managed

investment fund redeemed at current value and

wanted distributions paid back since inception.

Regarding the alleged failure to redeem

the units, ppp stated this was due to

matters beyond its control. These include

unwarranted delays by a builder responsible

for the development. Further, at the time the

redemption was requested, W Fund was an

unregistered managed investment scheme and

the right to redeem the units was governed by

the then applicable Trust Deed.

ppp also said that the units in the fund couldn’t

be redeemed because the W Fund was –

and remained – an illiquid fund (within the

meaning of section 601KA of the Corporations

Act 2001).

52

In response to the allegation that it had

failed to respond to correspondence and

in particular to requests for annual reports,

ppp stated that it had in fact provided all

such documents to the then trustee of the G

Trust, as was appropriate, and this had been

explained verbally to the complainants.

ppp rejected the allegation that it had failed

to disclose the possibility that the units could

not be redeemed upon request. It referred

to the Information Memorandum for the W

Fund provided to them before they made the

investment, which alerted them to the fact

that redemptions would be available “subject

to sufficient liquidity”.

The complainants asserted, and ppp did

not deny, that no other documentation was

provided to them regarding the operation of

the fund and the rights and responsibilities of

investors at the time they invested. Further,

if Mr and Mrs G were provided with the

information memorandum before they made

the decision to invest, it would appear to have

been provided at a time when it was already

out of date.

The Panel, in considering its decision, noted

that ppp had given a variety of reasons for not

redeeming the complainants’ units:

• ppp was under no obligation to agree to

any redemption;

• redemption was always subject to liquidity,

and the scheme was illiquid;

• redemption of units was deferred pending

registration of the scheme; and

• redemption of units required the Requisite

Consent of 75% of unit holders (by

implication, this was presumably not

provided).

The Information Memorandum was out of date

at the time the investment was made by the

G Trust so the Panel doubted that ppp could

rely on it as in any way defining the rights of

the parties. There is no suggestion by ppp that

Mr and Mrs G were at any time provided with

a more current Information Memorandum or

equivalent document and Mr and Mrs G have

consistently stated they were not.

On the issue of illiquidity, ppp has consistently

asserted that the scheme was illiquid because

the money was tied up in the property

development at the heart of the scheme.

Section 601KA(4)-(5) of the Corporations

Act 2001 provides that a registered scheme

is liquid if at least 80% of the value of scheme

property is accounted for by liquid assets

comprising, amongst other things, “property

of a prescribed kind”. Subsection 601KA(6)

adds that any other property is a liquid asset

if the responsible entity reasonably expects

that it can be realised for market value within

the period specified in the constitution for

satisfying redemption requests while the

scheme is liquid.

In the light of the Panel’s conclusion that

the units could have been redeemed when

the initial request for redemption was

made, it is not necessary to consider the

complainant’s allegations that the investment

was inappropriate because of its potential

illiquidity or otherwise, or that this was not

adequately explained to them.

ppp did not advance any other arguments in

support of its contention that the fund was

illiquid and the Panel was not persuaded

on the evidence before it that the fund was

illiquid at that time.

The Panel also looked at distributions and,

as no dividends had been declared or would

have been declared between September 2000

and March 2001, they decided that it wasn’t

appropriate to direct additional compensation

for foregone dividends.

The Panel reviewed the evidence of the

parties’ dealings and correspondence and

was persuaded that ppp did not respond in a

timely fashion to the complainants’ repeated

requests for information, including annual

reports etc.

Y The Panel found in favour for Mr and

Mrs G, concluding that ppp’s conduct

demonstrated not only a breach of its duty

as trustee but also a failure to act with the

care and diligence that would be expected

of a trustee.

On the issue of redress, the Panel directed

ppp to purchase the units currently held

by the G Trust from the G Trust, at the unit

price that would have applied at 21 March

2001 when the redemption of those units

was first requested. This was calculated

as $1.30, giving a total purchase price of

$41,902.24.

The Panel also directed ppp to not seek

to reimburse itself from the assets of the

W Fund in respect of the costs it incurs in

complying with the redress.

53

telephone complaints

how many people rang

2007 2006

7,501 7,045

statistics for 2007telephone complaints

These 2007 statistics include all the Westpoint statistics (reported separately on page 31)

which explains some of the differences to last year’s statistics.

what type of complaints people rang about 2007 2006

no. % no. %

denial of claim 398 14 260 14

denial of claim & policy avoidance 37 1 0 0

inappropriate advice* 183 6 534 29

inappropriate advice – super choice 152 5 67 4

misrepresentation 160 5 49 3

non–disclosure 234 8 101 6

policy values/charges 174 6 44 2

standard of company service 1,251 42 701 38

share transaction – misunderstanding 82 3 28 2

policy terms and conditions 266 9 37 2

technical problems 17 1 5 <1

no written plan 0 0 2 <1

failure to meet customer protection standard 0 0 0 0

total 2,954 100 1,828 100

Not all calls require a nature of complaint to be recorded. Instances of such calls include those outside jurisdiction or follow up calls from complainants regarding complaint progression.Rounding of figures has taken place to account for figures <1.

* This figure has been much higher in 2006 and 2007 due to calls relating to Westpoint.

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54

telephone complaints

what products people complained about when they rang

2007 2006

no. % no. %

allocated pension 45 <1 28 1

bank deposits 4 <1 8 <1

contracts for difference 17 <1 18 <1

debentures 9 <1 2 <1

deferred annuity 16 <1 15 <1

endowment 65 1 31 1

funeral plan 183 3 82 2

immediate annuity 26 <1 12 <1

income protection 451 8 542 12

investment single/regular premium 19 <1 31 1

managed funds 549 10 453 10


mortgage protection 40 1 6 <1

non fics 998 18 537 12

promissory note 99 2 363 8

property 3 <1 5 <1

shares – derivatives warrants 483 9 330 7

superannuation – company 7 <1 10 <1

superannuation – personal 262 5 186 4

term/temporary insurance 1,325 24 697 15

timeshare 48 1 46 1

total & permanent disablement 138 3 124 3

trauma 49 1 56 1

unit trusts – property 16 <1 10 <1

whole of life 124 2 411 9

other (individually less than 1% for both years) 52 <1 75 <1

total 5,494 100 4,591 100

Not all product types were recorded on initial telephone contact. Instances of such calls would include those outside jurisdiction or follow up calls from complainants regarding complaint progression. Rounding of figures has taken place to account for the figures <1.

55

written complaints

Consumers with a complaint must contact the Member and lodge their complaint with the

Member’s idr process prior to coming to fics. If the consumer is not satisfied with this

process/response, then they can complete and send us a Summary of Complaint and an

Authority to Proceed – making it an official fics complaint.

new complaints in 2007 2007 2006

new complaints received during the year

1,127 1,375

reopened 90 115

finalised* 1,214 1,307

active at end of period 665 723

* ‘Finalised’ does not include those complaints where a Panel or Adjudicator determination has been issued but the complaint remains open pending further administrative requirements.

new complaints – by industry 2007 2006

no. % no. %

life insurance 388 34 451 33

financial planning* 336 30 587 43

stockbroking 165 15 100 7


non–fics industry type** 100 9 57 4

new complaints not yet assessed 0 0 2 <1

other*** 18 1 21 2

total 1,127 100 1,375 100

* This figure is higher than usual due to Westpoint complaints.** Non-fics industry refers to complaints received against companies that are not members of fics.*** Other denotes industry types that do not fit the standard categories such as Traders in Futures and Contracts for Difference. Rounding of some figures has taken place.

new complaints progressed to investigation

2007 2006

no. % no. %


financial planning 276 45 305 42



other* 17 2 16 2

total 618 100 725 100

A complaint is progressed to investigation when a signed Authority to Proceed and Summary of Complaint is received and a preliminary assessment made that it is within jurisdiction.

* Other denotes industry types that do not fit into standard categories such as Traders in Futures and Contracts for Difference

Rounding of some figures has taken place.

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written complaints

finalised complaints – by industry

2007 2006

no. % no. %


financial planning 401 33 418 32



other* 22 2 15 1

non–fics industry** 98 8 59 5

total*** 1,214 100 1,307 100

* Other denotes industry types that do not fit into standard categories such as Traders in Futures and Contracts for Difference

** Non fics industry refers to complaints received against companies that are not Members of fics.*** The 2006 figure is lower than usual as many Westpoint cases were placed on hold while waiting for the results of

the Federal Court decision Rounding of some figures has taken place.

what stage open complaints reached by the end of 2007

2007 2006

no. % no. %

new complaints not yet assessed 0 0 2 <1

investigation pending 165 25 205 28

complaints under investigation 270 41 340 47

complaints referred to adjudicator 36 5 43 6

complaints referred to panel 186 28 118 16

adjudication issued* 0 0 4 <1

determination issued* 8 1 11 2

total 665 100 723 100

A complaint is only progressed to investigation when a signed Authority to Proceed and Summary of Complaint is received and a preliminary assessment made that it is within jurisdiction.

* These Panel and Adjudicator complaints remain open pending finalisation of administrative requirements. Rounding of some figures has taken place.

open complaints at the end of 2007 2007 2006

no. % no. %


financial planning* 323 49 363 50



non–fics industry 2 <1 0 <1

other** 14 2 17 2

new complaints not yet assesed 0 0 2 <1

total 665 100 723 100

* The 2006 figure is higher than usual as many Westpoint cases were placed on hold while waiting for the results of the Federal Court decision

** ‘Other’ denotes industry types that do not fit into standard categories such as Traders in Futures and Contracts for Difference


57

where the new complaints came from

life insurance financial planning stockbroking managed investments other all industries

no. % no. % no. % no. % no. % no. %

act 1 1 2 <1 4 7 1 2 2 12 10 2

nsw 62 30 82 30 18 30 20 36 5 29 187 30

nt 0 0 1 <1 0 <1 0 <1 0 <1 1 <1

qld 36 17 62 22 9 15 11 20 2 12 120 19

sa 10 5 14 5 5 7 3 5 1 6 33 5

tas 5 2 1 <1 2 3 4 7 0 <1 12 2

vic 70 34 65 24 18 30 8 14 4 23 165 27

wa 21 10 48 17 3 5 5 9 2 12 79 13

state not recorded 3 1 1 <1 2 3 4 7 1 6 11 2

total 208 100 276 100 61 100 56 100 17 100 618 100

Rounding of figures has taken place to account for the figures <1.

written complaints

58

all complaints finalised and their outcomes

2007 2006

no. % no. %

Complaint not Forwarded to Member

duplicated** 34 6 41 7

outside jurisdiction 222 38 259 45

withdrawn 84 15 61 11

complainant did not respond*

140 24 179 31

complaint dismissed 1 <1 0 0

resolved by member*** 97 17 31 6

total 578 100 571 100

Case Manager




resolved by agreement – conciliation conference

58 13 69 15

resolved by agreement – case management

170 38 163 35

inappropriate complaint 0 0 3 1

in favour of member 9 2 0 0

total 440 100 466 100

Adjudicator outside jurisdiction 1 1 0 0

withdrawn 1 1 0 0


2 4 1 1

resolved by agreement – panel case management

1 1 3 4

complaint dismissed 1 1 0 0

in favour of complainant 31 46 37 45


total 68 100 82 100

all complaints finalised and their outcomes

2007 2006

no. % no. %

Panel outside jurisdiction 5 4 0 0

withdrawn 9 7 7 4


2 2 4 2


9 7 15 8

complaint dismissed 1 <1 0 0



total 128 100 188 100

Total duplicated** 34 3 41 3




140 12 179 14


inappropriate complaint 0 0 3 <1


62 5 74 6


170 14 163 12


10 1 18 1




total 1,214 100 1,307 100

* ‘Complainant did not respond’, refers to when the complainant does not respond to requests for further information after at least two follow ups.

** ‘Duplicated’ are complaints that the complainant tries to bring/raise multiple times or complaints that are administratively duplicated.

*** ‘Resolved by Member’ occurs when the Member resolves the complaint either before it is referred to a Case Manager or at the Case Manager stage.


written complaints

59

how long it took to resolve complaints (all industries)

2007 2006

months no. % no. %

Case Manager up to 2 mths 137 31 160 34

2-3 mths 63 14 80 17

3-4 mths 45 10 47 10

4-5 mths 38 9 47 10

5-6 mths 30 7 33 7

6-7 mths 20 4 22 5

7-8 mths 30 7 12 3

8+ mths 77 18 65 14

total 440 100 466 100

Adjudicator up to 3 mths 4 6 5 6

3-6 mths 14 21 36 44

6-9 mths 32 47 18 22

9-12 mths 7 10 12 15

12-18 mths 8 12 10 12

18-24 mths 2 3 1 1

24+ mths 1 1 0 <1

total 68 100 82 100

Panel up to 3 mths 5 4 5 3

3-6 mths 18 14 33 18

6-9 mths 27 21 41 22

9-12 mths 26 20 44 24

12-18 mths 32 25 42 22

18-24 mths 10 8 12 6

24+ mths 10 8 10 5

total 128 100 187 100

total 636 735

The Case Manager statistics measure the time taken from when a complaint is sent to the member until it is closed by the Case Manager. The Adjudicator and Panel statistics measure the time taken from when the complaint is referred to the Adjudicator or Panel until a Determination is issued or the file is closed.


written complaints

60

life insurance statistics

open life insurance complaints

at the end of 2007

no. %


complaints under investigation 102 49

complaints with adjudicator 6 3

complaints with panel 46 22

determination issued * 3 1

total 209 100

A complaint is not referred to a Case Manager until signed Authority to Proceed and Summary of Complaint forms are received and a preliminary investigation made to ensure the complaint is within jurisdiction.

* These Panel complaints remain open pending finalisation of administrative requirements.


what new life insurance complaints were about

2007 2006

no. % no. %

standard of member service 27 13 50 18

denial of claim 98 47 171 61

denial of claim and policy avoidance 8 4 0 0

inappropriate advice 0 0 4 1

policy values/charges 25 12 12 4


non-disclosure 5 2 10 4

non-disclosure – fees/charges 2 1 1 0

non-disclosure – conditions and

warning

0 0 1 0


technical problems 0 0 2 <1

total 208 100 282 100


life insurance complaints fics couldn’t take on in 2007

no. %

complainant knew all facts over six years ago 10 18

complaint lodged with another scheme 3 6

level of investment performance 2 4

level of premium 3 6

dealt with by court/another scheme 1 2

not a current member 1 2

over monetary limit 19 35

underwriting decision 5 9

superannuation trustee decision 5 9

type of complaint 5 9

total 54 100


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61

what type of issues new life insurance complaints were about

denial of claim

denial of claim and policy avoidance

misrepresentation non-disclosure policy terms and

conditions

policy value/charges

standard of member’s

service

total

deferred annuity 0 0 1 0 1 0 1 3

endowment 0 0 1 1 1 2 0 5

funeral plan 0 0 0 0 0 0 2 2

immediate annuity 0 0 0 1 2 2 1 6

income protection 46 3 1 1 14 10 2 77

investment regular premium 0 0 3 0 0 0 1 4

investment single premium 0 0 2 0 0 0 1 3

mortgage protection 8 1 0 0 0 1 0 10

super – personal 0 0 0 2 0 0 1 3

term/temporary 25 1 5 2 7 8 13 61

total and permanent disability 12 0 0 0 1 0 1 14

trauma 6 3 0 0 0 0 2 11

whole of life 1 0 2 0 2 2 2 9

total 98 8 15 7 28 25 27 208



62


life insurance complaints finalised and their outcomes

2007 2006

no. % no. %






68 38 82 42


total 178 100 195 100

Case Manager





71 39 66 32


33 18 35 17


in favour of complainant****

65 36 0 0

in favour of member**** 55 30 0 0

total 303 100 208 100

Adjudicator resolved by agreement – conciliation conference

1 6 0 0


0 0 2 12

finalised by agreement 0 0 0 0

complaint dismissed/withdrawn

2 12 0 0



total 16 100 17 100

life insurance complaints finalised and their outcomes

2007 2006

no. % no. %


withdrawn 2 4 5 4


2 4 3 3


4 8 14 12



total 53 100 116 100




49 11 64 12


68 16 82 15


resolved by agreement - case management

71 17 66 12

resolved by agreement - conciliation conference

36 8 38 7

resolved by agreement - panel case management

4 <1 16 3



total 430 100 536 100

* ‘Complainant did not respond’, refers to when the complainant did not respond to requests for further information after at least two follow ups.



**** These are new system categories for 2007 that were not used in 2006. Rounding of some figures has taken place.

63

financial planning

open financial planning complaints at the end of 2007

no. %





adjudication issued* 0 0

determination issued* 4 1

total 323 100

A complaint is not referred to a Case Manager until signed Authority to Proceed and Summary of Complaint forms are received, and a preliminary investigation made to ensure the complaint is within jurisdiction.

* These Panel and Adjudicator complaints remain open pending finalisation of administrative requirements.


what new financial planning complaints were about

2007 2006

no. % no. %

inappropriate advice* 206 75 216 71

inappropriate advice – super choice 3 1 1 0




non-disclosure – risk 2 1 1 0

non-disclosure conditions and warnings

1 <1 2 1

non-disclosure tax/social security 0 0 2 1

policy values/charges 1 <1 0 0


share transaction – misunderstanding 1 <1 1 0

denial of claim 1 <1 1 0

technical problems 0 0 1 0


no written plan 1 <1 0 0

total 276 100 305 100

* This figure has been high for the last two years as it is the most common category of complaint relating to Westpoint Rounding of some figures has taken place.

financial planning complaints fics couldn’t take on in 2007

no. %

company not involved in complaint 3 3

complainant knew all facts over six years 4 5

complainant’s interest insufficient 2 2


not a current member of fics 31 35

type of complaint 1 1


subject to legal proceedings 10 11


total 88 100


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what types of issues new financial planning complaints were about

denial of claim

inappropriate advice

inappropriate advice – super

choice

misrepresentation no written

plan

non-disclosure

policy values/charges

share transaction misunderstanding


service

total

allocated pension 0 3 0 0 0 2 0 0 2 7

bank deposits 0 0 0 0 0 1 0 0 0 1

debentures 0 1 0 0 0 0 0 0 0 1

endowment 0 1 0 1 0 0 0 0 0 2

foreign exchange and currency products

0 2 0 0 0 0 0 0 1 3

immediate annuity 0 11 0 0 0 1 1 0 0 13

income protection 0 2 0 2 0 0 0 0 0 4

investment – single premium

0 1 0 0 0 0 0 0 0 1

managed funds 0 15 0 3 0 4 0 0 4 26

managed investments 0 22 0 6 1 2 0 0 5 36

mortgage to consumer 0 1 0 0 0 1 0 0 1 3

promissory note 0 107 0 2 0 0 0 0 0 109

property 0 3 0 0 0 0 0 0 0 3

shares – derivatives/warrants

0 13 0 1 0 3 0 1 4 22

super – company 0 3 0 0 0 0 0 0 0 3

super – personal 0 19 2 0 0 7 0 0 6 34

term/temporary 0 0 1 0 0 1 0 0 0 2

total & permanent disablement

1 0 0 0 0 0 0 0 1 2

trauma 0 1 0 0 0 0 0 0 0 1

unit trusts – property 0 0 0 0 0 0 0 0 1 1

whole of life 0 1 0 1 0 0 0 0 0 2

total 1 206 3 16 1 22 1 1 25 276


financial planning

65

financial planning complaints finalised and their outcomes

2007 2006

no. % no. %





24 18 1 10


38 27 51 27


total 139 100 189 100

Case Manager



17 10 13 10



55 34 47 35


14 9 18 14

in favour of complainant*** 0 0 0 0


total 163 100 133 100



1 3 1 2



total 33 100 45 100

financial planning complaints finalised and their outcomes

2007 2006

no. % no. %

Panel complaint dismissed/withdrawn

8 12 2 4


finalised by agreement – panel case management

4 6 0 0


0 0 1 2



total 66 100 51 100




49 13 34 8


38 9 51 12



55 14 47 11


15 4 20 5


4 1 0 0



total 401 100 418 100





financial planning

66

open managed investment complaints at

the end of 2007

no. %





total 52 100

A complaint is not referred to a Case Manager until signed Authority to Proceed and Summary of Complaint forms are received, and a preliminary investigation made to ensure the complaint is within jurisdiction.


what new managed investments complaints were about

2007 2006

no. % no. %





non-disclosure – conditions &

warnings

3 5 0 0

non-disclosure – tax/social security 0 0 2 3


policy terms & conditions 2 4 3 4



training/competencies 0 0 1 1

policy value/charges 5 9 0 0

total 56 100 71 100


managed investment complaints fics couldn’t take on in 2007

no. %




management of fund/scheme as a whole 5 27


level of fee, premium or charge 1 5


dealt with by a court/another scheme 1 5


subject of legal proceedings 1 5

total 19 100


managed investments

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67

what type of issues new managed investment complaints were about


misrepresentation non- disclosure

policy terms and conditions

value/charges


service

technical problems

total

managed funds 0 0 0 0 0 5 0 5

managed investments 0 4 2 2 5 9 1 23

mortgage to consumer 0 0 1 0 0 1 0 2

promissory note 2 0 0 0 0 0 0 2

shares – derivatives/ warrants

0 0 0 0 0 1 0 1

timeshare 1 13 3 0 0 4 0 21

unit trusts – property 0 1 1 0 0 0 0 2

total 3 18 6 2 5 20 1 56


managed investments

68

managed investment complaints finalised and their outcomes

2007 2006

no. % no. %






18 28 28 36


total 64 100 79 100

Case Manager

outside jurisdiction 0 <1 9 12

withdrawn 3 8 5 7



16 41 24 33


6 15 9 12



total 39 100 73 100


finalised by agreement - panel case management

1 17 1 10



total 6 100 10 100

managed investment complaints finalised and their outcomes

2007 2006

no. % no. %


finalised by agreement – panel case management

1 50 0 0



total 2 100 6 100





18 16 28 17

resolved by member** 29 26 27 16


16 14 24 14


6 5 9 5


2 2 1 1




total 111 100 168 100





managed investments

69

stockbroking

open stockbroking complaints at the

end of 2007

no. %





determination issued 1 2

total 65 100

A complaint is not referred to a Case Manager until signed Authority to Proceed and Summary of Complaint forms are received, and a preliminary investigation made to ensure the complaint is within jurisdiction.Rounding of some figures has taken place.

what new stockbroking complaints were about

2007 2006

no. % no. %






non-disclosure – conditions & warnings

0 0 1 2

non-disclosure – tax/social security 0 0 0 0

share transaction – misunderstanding 18 29 13 26


total 61 100 51 100


stockbroking complaints fics couldn’t take on in 2007

no. %

company not involved in complaint 1 8





total 13 100


what types of issues new stockbroking complaints were about


misrepresentation non-disclosure

share transaction

misunderstanding

standard of member’s advice

technical problems

total

debentures 0 1 0 0 0 0 1

shares/derivatives/warrants 13 0 3 18 22 3 59

superannuation – personal 0 0 0 0 1 0 1

total 13 1 3 18 23 3 61


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70

stockbroking

stockbroking complaints finalised and their outcomes

2007 2006

no. % no. %




withdrawn 13 14 3 7


14 15 13 29


total 95 100 45 100

Case Manager




4 9 9 20



22 50 7 16


4 9 0 0



total 44 100 73 100

Adjudicator finalised by agreement 0 0 0 0



withdrawn 0 0 0 0

total 8 100 8 100

stockbroking complaints finalised and their outcomes

2007 2006

no. % no. %


withdrawn 0 0 0 0



0 0 1 7



total 5 100 14 100





17 12 7 6


14 9 13 12

resolved by member** 66 43 10 9


22 14 19 17


4 3 7 6


0 0 1 1




total 152 100 111 100





the fics team

front row – l-r

Michael D’Argaville, Corinne Cross, Lorraine

Russell-Haddon, Danielle Samartzis, Alison

Maynard, Loren Deligiorgis, Megan Calvert,

Jackie Nutter, Joanne Aarons, Silvia Renda,

Maria Romeo

back row – l-r

Linda Galbally, Denny Meadows, Michael

Ridgway, Carolyn Matthews, Alan Smith, Claire

Axelson, Michele Foulds, Hannah Cuthbertson,

Dennis Cooper, Tracy O’Keeffe, Amy Main,

Nichola Caddeo, Troy Nutley, Gail Pamphilon,

Karen Driessen, Fran Bolger, Nicholas

Crowhurst, Michael Arnold, Nicole Mackay,

Muriel Piscitelli, Amie Kaufman, Amie Foster,

Michael Croyle, Trevor Slater, Troy Hunter,

Ben Walker

absent

Olivia Davis, Kevin Haddon, Alycia James

71

On 1 July 2008, fics merged with the Banking and Financial Services Ombudsman

and the Insurance Ombudsman Service to form the new Financial Ombudsman Service,

with the following contact details:

telephone

1300 78 08 08

(for the cost of a local call, excluding mobiles)

facsimile

(03) 9613 6399

web

www.fos.org.au

email

[email protected]

mail

gpo Box 3

Melbourne Vic 3001

contacting us

2007 fics annual review - Financial Ombudsman Service · 2008-10-13 · sits on the fics website at...

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