The Australian Financial Complaints Authority (AFCA) has flagged the degree to which it expects the Shield Master Fund, First Guardian Master Fund and United Global Capital collapses to feed through to costs in the system.
While complaints relating to financial advice appeared to have decline markedly in recently years, the latest annual AFCA data has confirmed that on the back of the Dixon Advisory collapse, Shield and First Guardian complaints had helped drive an 18% increase for the sector.
What is more, AFCA chief ombudsman and chief executive, David Locke backed the Compensation Scheme of Last Resort (CSLR) as appropriate in such circumstances.
Releasing its 2024-25 data, Locke confirmed there had been an 18% increase in complaints in the investment and advice sector to 4,193 complaints.
The good news for financial advisers facing into funding the Compensation Scheme of Last Resort is that their sector is still less problematic that banking and insurance, but the bad news is the number of problems already on AFCA’s books.
According to Locke, the three most complained about financial products overall in 2024-25 were personal transaction accounts, motor vehicle insurance and credit cards. The top three issues were misleading product or service information, delay in insurance claim handling, and service quality.
“Investment and advice complaints rose 18 per cent amid a string of failures, including United Global Capital, Shield Master Fund, First Guardian Master Fund, and Brite Advisors PL,” he said.
There was an allied 95% rise in complaints involving self-managed super funds (SMSF) to 1,323 complaints, accounting for a third of complaints in investments and advice. Complaints alleging failure to act in the client’s best interest rose 124 per cent to 1,266.
“What we’re seeing in complaints is a clear pattern of conflicted advice models and the inappropriate use of self-managed super funds that ultimately isn’t in the customer’s best interest,” Locke said. “This only highlights the need for the Compensation Scheme of Last Resort for victims of unlawful advice.”
Locke welcomed an improvement in claim handling by superannuation funds, with complaints about delays in claim handling falling 39 per cent in 2024-25.
“The reduction in superannuation complaints is a positive sign that improvements are being made, but we’re still concerned that the top three issues relate to service quality and we urge superannuation funds to improve service standards,” he said.
AFCA received more than 100,000 complaints for a second successive year with the following being the break-down:
Banking and finance 54,581 complaints (down 9%)
General insurance 34,231 complaints (up 17%)
Superannuation 6,164 complaints (down 16%)
Investments and advice 4,193 complaints (up 18%)
Life insurance 1,518 complaints (up 5%)