Annual Review 2022–23
Contents
- About this Annual Review
- Year at a glance
- Acknowledgement of country
- Board Chair message
- Chief Executive Officer and Chief Ombudsman message
- Organisational overview
- AFCA Independent Review
- Complaints
- Who complained to AFCA?
- Overview of complaints
- Open cases
- Closed cases
- Banking and finance complaints
- Buy now pay later
- Scam complaints
- Financial difficulty complaints
- Small business complaints
- General insurance complaints
- Significant events
- Life insurance complaints
- Superannuation complaints
- Investments and advice complaints
- Cryptocurrency
- Complaints lodged by Aboriginal and Torres Strait Islander peoples
- Complaints lodged by consumer advocates and financial counsellors
- Complaints lodged by paid representatives
- Complaints outside AFCA’s Rules
- AFCA’s Systemic Issues function
- AFCA’s Code compliance and monitoring functiong
- Engagement, awareness and accessibility
- Corporate information
- AFCA General Purpose Financial Report
- Glossary
Between 1 July 2022 and 30 June 2023
Investments and advice complaints received ²
Percentage of investments and advice complaints resolved at Registration and Referral stage
Top five investments and advice complaints received by product
|
Product |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Self-managed superannuation fund |
228 |
345 |
272 |
259 |
1,696 |
|
Foreign exchange |
845 |
759 |
431 |
260 |
757 |
|
Shares |
226 |
528 |
950 |
669 |
703 |
|
Superannuation fund |
171 |
451 |
302 |
272 |
328 |
|
Cash management accounts |
40 |
54 |
87 |
143 |
233 |
Top five investments and advice complaints received by issue ³
|
Issue |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Inappropriate advice |
323 |
585 |
534 |
241 |
1,662 |
|
Failure to follow instructions/agreement |
701 |
575 |
229 |
332 |
951 |
|
Failure to act in client's best interests |
212 |
469 |
525 |
281 |
534 |
|
Service quality |
118 |
380 |
674 |
570 |
371 |
|
Incorrect fees/costs |
194 |
335 |
331 |
212 |
211 |
Investments and advice complaints closed
Average time to close a investments and advice complaint in days ⁴
Stage at which investments and advice complaints closed
|
Stage |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
At Registration |
443 |
1,056 |
1,148 |
966 |
863 |
|
At Case Management |
354 |
1,102 |
938 |
717 |
688 |
|
At Rules Review |
217 |
1,308 |
584 |
630 |
337 |
|
Preliminary Assessment |
54 |
328 |
333 |
235 |
160 |
|
Decision |
27 |
467 |
462 |
342 |
209 |
Time taken to close investments and advice complaints
|
Time |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Closed in 0–30 days |
303 |
658 |
666 |
595 |
494 |
|
Closed in 31–60 days |
317 |
975 |
779 |
731 |
602 |
|
Closed in 61–180 days |
466 |
1,798 |
1,352 |
1,047 |
675 |
|
Closed in 181–365 days |
9 |
653 |
499 |
267 |
289 |
|
Closed in in more than 365 days |
0 |
177 |
169 |
250 |
197 |
¹ AFCA commenced on 1 November 2018. The 2018–2019 financial year covers an 8-month period (from 1 Nov 2018 to 30 Jun 2019). Year-on-year changes be between 2018–19 and 2019–20 have been calculated pro rata using monthly averages.
² Of the 4,840 investments and advice complaints received in the 2022–23 financial year, 1,720 (36%) and 654 (14%) related to two financial firms. Complaints against these firms made up 49% of the total complaints received. In the absence of these complaints, the overall number of investment and advice complaints would have totalled 2,466, which was 22% lower in 2022–23 than in 2021–22. In addition, this has impacted the data in the top five investment and advice complaints received by product.
³ The top five issues for complaints that did not relate to these two firms were service quality (369), failure to follow instructions/agreement (301), failure to act in the client's best interests (269), incorrect fees/costs and and inappropriate advice (185).
⁴ This excludes complaints that were inactive for an extended period, for example complaints that were paused because the financial firm was insolvent or due to court proceedings, and complaints that were previously closed and re-opened.
Investments and advice products AFCA can consider complaints about include:
- derivatives
- financial product advice and services
- managed investment schemes
- securities
- self-managed superannuation funds
- horse-racing syndicates
- timeshare.
Issues and problems AFCA can resolve include:
- advice that was not in the client’s best interests
- incorrectly applied fees, commissions or other charges
- misleading product information
- not correctly following a client’s instructions
- unauthorised transactions.
Key insights
- A recent downward trend in complaints related to investment and advice products would have continued in 2022–23, if not for one-off surges in complaints to AFCA relating to two firms.
- If the complaints against these two firms were excluded from the figures, total complaints in this category in 2022–23 would have fallen for a third successive year.
Of the total 4,840 complaints received in 2022–23 about investment and advice, 1,696 (35%) were related to self-managed superannuation funds, 757 (16%) were about foreign exchange transactions and 703 (15%) were related to shares. Excluding complaints from the two firms mentioned, the top three products for complaints in 2022–23 would have been shares (589 or 24%), superannuation funds (292 or 12%) and cash management accounts (219 or about 9%).
Inappropriate advice was the most complained about issue in 2022–23, with 1,662 complaints, or 34% of the total. This was followed by 951 complaints about failure to follow instructions or agreements (20%) and failure to act in the client’s best interests (534 or 11%). Excluding the complaints from the two firms, the top three issues would have been service quality (369 or 15%), failure to follow instructions or agreements (301 or 12%) and failure to act in the client’s best interests (269 or 11%).
In 2022–23, AFCA closed 2,257 investment and advice complaints. We closed 863 (38%) at the Registration and Referral stage, 848 (38%) at Case Management stage and 337 (15%) at Rules Review stage. The average closure time increased marginally from 106 days in 2021–22 to 112 this financial year.
Case study – Excessive trading on an SMSF account
Background
Mr and Mrs J lodged a complaint against advisory firm X, which was an authorised representative of financial firm A from November 2019 to February 2020, and of financial firm B from March 2020 to July 2020.
The complainants had entrusted their entire life savings to the advisory firm, which they accused of excessive trading, or ‘churning’, causing them financial loss. Financial firms A and B said advisory firm X provided general advice only and denied the accounts were churned.
Advisory firm X conducted more than 300 trades on the complainants’ personal and self-managed superannuation accounts over five months, resulting in $15,193.27 in commissions and brokerage being paid to advisory firm X.
Findings and outcomes
The AFCA panel found that the advisory firm:
- provided share trading advice, recommending a strategy of active trading of ASX 300 shares
- had de facto control over the complainants’ share trading account, Mr and Mrs J had little or no experience in investing and accepted the advisory firm’s recommendations for the trades without questioning (or trusted the advisory firm’s recommendations).
The panel found that churning had occurred in reckless disregard to the complainants’ interests, and amounted to a breach of advisory firm X’s obligations to provide financial service efficiently, honestly and fairly. The panel found the complainants would not have suffered to the extent they did, but for the conduct of advisory firm X.
The panel noted that financial firms A and B had provided little information to assist AFCA’s investigation. Neither phone call recordings nor trade reconciliation reports were supplied.
Financial firms A and B were directed to compensate the complainants for losses of $158,220.02 (equivalent to about 9% of the total $1.6 million invested by the couple) incurred due to the trades undertaken by advisory firm X. The compensation figure was calculated by comparing the complainants’ investment portfolios with an industry fund with similar share portfolios on a ‘buy and hold’ strategy.
Financial firms A and B were also directed to pay the maximum amount allowed for legal fees, $5,000 to each of the complainants, and $2,000 for non-financial loss. The panel was satisfied that the complaint had taken longer than usual to resolve, largely due to the advisory firm’s failure to cooperate and provide full information. This had caused the complainant a high degree of inconvenience.
