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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 thunter@fics.asn.au
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
1999 as a consumer representative.
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
1999 as a consumer representative.
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
Chair: Peter E. Daly, AM
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)
Chair: Peter E. Daly, AM
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
financial planning 66
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
financial planning 33
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.
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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
• 93% of Members and 89% of consumers
thought fics staff were helpful
• 86% of Members and 81% of consumers
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.
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“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?
Not likely at all 2%
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?
Not likely at all 3%
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.
Y Both parties were satisfied with this resolution.
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.
Y Both parties were satisfied with this resolution.
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.
Y Both parties were satisfied with this resolution.
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.
Y Both parties were satisfied with this resolution.
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.
Y Both parties were satisfied with this resolution.
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
managed investments 466 8 547 12
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
managed investments 120 11 157 11
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. %
life insurance 208 34 282 39
financial planning 276 45 305 42
stockbroking 61 10 51 7
managed investments 56 9 71 10
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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56
written complaints
finalised complaints – by industry
2007 2006
no. % no. %
life insurance 430 35 536 41
financial planning 401 33 418 32
stockbroking 152 13 111 8
managed investments 111 9 168 13
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. %
life insurance 209 31 242 33
financial planning* 323 49 363 50
stockbroking 65 10 51 7
managed investments 52 8 48 7
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
Rounding of some figures has taken place.
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
outside jurisdiction 33 8 25 5
withdrawn 29 7 53 11
resolved by member*** 141 32 153 33
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
resolved by agreement – conciliation conference
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
in favour of member 31 46 41 50
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
resolved by agreement – conciliation conference
2 2 4 2
resolved by agreement – panel case management
9 7 15 8
complaint dismissed 1 <1 0 0
in favour of complainant 68 53 94 36
in favour of member 34 27 68 50
total 128 100 188 100
Total duplicated** 34 3 41 3
outside jurisdiction 261 21 284 22
withdrawn 123 10 121 9
complainant did not respond*
140 12 179 14
resolved by member*** 238 20 184 14
inappropriate complaint 0 0 3 <1
resolved by agreement – conciliation conference
62 5 74 6
resolved by agreement – case management
170 14 163 12
resolved by agreement – panel case management
10 1 18 1
complaint dismissed 12 1 0 0
in favour of complainant 99 8 131 10
in favour of member 65 5 109 8
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.
Rounding of some figures has taken place.
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.
Rounding of some figures has taken place.
written complaints
60
life insurance statistics
open life insurance complaints
at the end of 2007
no. %
investigation pending 52 25
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.
Rounding of some figures has taken place.
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
policy terms and conditions 28 14 8 3
non-disclosure 5 2 10 4
non-disclosure – fees/charges 2 1 1 0
non-disclosure – conditions and
warning
0 0 1 0
misrepresentation 15 7 23 8
technical problems 0 0 2 <1
total 208 100 282 100
Rounding of some figures has taken place.
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
Rounding of some figures has taken place.
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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
Rounding of some figures has taken place.
life insurance statistics
62
life insurance statistics
life insurance complaints finalised and their outcomes
2007 2006
no. % no. %
Complaint not Forwarded to Member
duplicated** 15 8 9 5
outside jurisdiction 47 27 60 31
withdrawn 32 18 28 14
complainant did not respond*
68 38 82 42
resolved by member*** 16 9 16 8
total 178 100 195 100
Case Manager
outside jurisdiction 6 3 7 3
withdrawn 11 6 31 15
resolved by member*** 60 33 69 33
resolved by agreement – case management
71 39 66 32
resolved by agreement – conciliation conference
33 18 35 17
complaint dismissed 2 1 0 0
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
resolved by agreement – panel case management
0 0 2 12
finalised by agreement 0 0 0 0
complaint dismissed/withdrawn
2 12 0 0
in favour of complainant 4 25 6 35
in favour of member 9 56 9 53
total 16 100 17 100
life insurance complaints finalised and their outcomes
2007 2006
no. % no. %
Panel outside jurisdiction 1 2 0 0
withdrawn 2 4 5 4
resolved by agreement – conciliation conference
2 4 3 3
resolved by agreement – panel case management
4 8 14 12
in favour of complainant 23 43 53 46
in favour of member 21 40 41 35
total 53 100 116 100
Total duplicated** 15 3 9 2
outside jurisdiction 54 13 67 13
complaint dismissed/withdrawn
49 11 64 12
complainant did not respond*
68 16 82 15
resolved by member*** 76 18 85 16
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
in favour of complainant 27 6 59 11
in favour of member 30 7 50 9
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.
** ‘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.
**** 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. %
investigation pending 68 21
complaints under investigation 110 34
complaints with adjudicator 17 6
complaints with panel 124 38
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.
Rounding of some figures has taken place.
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
misrepresentation 16 7 12 4
non-disclosure 4 1 4 1
non-disclosure – fees/charges 15 6 11 4
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
standard of member service 25 9 51 17
share transaction – misunderstanding 1 <1 1 0
denial of claim 1 <1 1 0
technical problems 0 0 1 0
policy terms and conditions 0 0 2 1
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
level of investment performance 1 1
not a current member of fics 31 35
type of complaint 1 1
over monetary limit 33 38
subject to legal proceedings 10 11
superannuation trustee decision 4 4
total 88 100
Rounding of some figures has taken place.
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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
standard of member’s
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
Rounding of some figures has taken place.
financial planning
65
financial planning complaints finalised and their outcomes
2007 2006
no. % no. %
Complaint not Forwarded to Member
duplicated** 10 7 18 9
outside jurisdiction 57 41 88 47
complaint dismissed/withdrawn
24 18 1 10
complainant did not respond*
38 27 51 27
resolved by member*** 10 7 13 7
total 139 100 189 100
Case Manager
outside jurisdiction 26 16 7 5
complaint dismissed/withdrawn
17 10 13 10
resolved by member*** 51 31 48 36
resolved by agreement – case management
55 34 47 35
resolved by agreement – conciliation conference
14 9 18 14
in favour of complainant*** 0 0 0 0
in favour of member 0 0 0 0
total 163 100 133 100
Adjudicator outside jurisdiction 1 3 0 0
resolved by agreement – conciliation conference
1 3 1 2
in favour of complainant 18 55 20 45
in favour of member 13 39 24 53
total 33 100 45 100
financial planning complaints finalised and their outcomes
2007 2006
no. % no. %
Panel complaint dismissed/withdrawn
8 12 2 4
outside jurisdiction 4 6 0 0
finalised by agreement – panel case management
4 6 0 0
resolved by agreement - conciliation conference
0 0 1 2
in favour of complainant 43 65 32 63
in favour of member 7 11 16 31
total 66 100 51 100
Total duplicated** 10 2 18 4
outside jurisdiction 88 22 95 23
complaint dismissed/withdrawn
49 13 34 8
complainant did not respond*
38 9 51 12
resolved by member*** 61 15 61 15
resolved by agreement - case management
55 14 47 11
resolved by agreement - conciliation conference
15 4 20 5
resolved by agreement - panel case management
4 1 0 0
in favour of complainant 61 15 52 12
in favour of member 20 5 40 10
total 401 100 418 100
* ‘Complainant did not respond’, refers to when the complainant did 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.
Rounding of some figures has taken place.
financial planning
66
open managed investment complaints at
the end of 2007
no. %
investigation pending 19 36
complaints under investigation 25 48
complaints with adjudicator 4 8
complaints with panel 4 8
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.
Rounding of some figures has taken place.
what new managed investments complaints were about
2007 2006
no. % no. %
inappropriate advice 3 5 4 6
misrepresentation 18 32 24 34
non-disclosure 1 2 2 3
non-disclosure – fees/charges 2 4 5 7
non-disclosure – conditions &
warnings
3 5 0 0
non-disclosure – tax/social security 0 0 2 3
non-disclosure – risk 1 2 0 0
policy terms & conditions 2 4 3 4
standard of member service 20 35 30 42
technical problems 1 2 0 0
training/competencies 0 0 1 1
policy value/charges 5 9 0 0
total 56 100 71 100
Rounding of some figures has taken place.
managed investment complaints fics couldn’t take on in 2007
no. %
complainant knew all facts over six years ago 1 5
complaint lodged with another scheme 1 5
level of investment performance 1 5
management of fund/scheme as a whole 5 27
not a current member of fics 1 5
level of fee, premium or charge 1 5
over monetary limit 2 11
dealt with by a court/another scheme 1 5
superannuation trustee decision 5 27
subject of legal proceedings 1 5
total 19 100
Rounding of some figures has taken place.
managed investments
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67
what type of issues new managed investment complaints were about
inappropriate advice
misrepresentation non- disclosure
policy terms and conditions
value/charges
standard of member’s
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
Rounding of some figures has taken place.
managed investments
68
managed investment complaints finalised and their outcomes
2007 2006
no. % no. %
Complaint not Forwarded to Member
duplicated** 2 3 5 6
outside jurisdiction 19 30 35 44
withdrawn 10 16 10 13
complainant did not respond*
18 28 28 36
resolved by member*** 15 23 1 1
total 64 100 79 100
Case Manager
outside jurisdiction 0 <1 9 12
withdrawn 3 8 5 7
resolved by member*** 14 36 26 36
resolved by agreement – case management
16 41 24 33
resolved by agreement – conciliation conference
6 15 9 12
in favour of complainant 0 0 0 0
in favour of member 0 0 0 0
total 39 100 73 100
Adjudicator outside jurisdiction 0 0 0 0
finalised by agreement - panel case management
1 17 1 10
in favour of complainant 4 66 5 50
in favour of member 1 17 4 40
total 6 100 10 100
managed investment complaints finalised and their outcomes
2007 2006
no. % no. %
Panel outside jurisdiction 0 0 0 0
finalised by agreement – panel case management
1 50 0 0
in favour of complainant 0 0 2 33
in favour of member 1 50 4 67
total 2 100 6 100
Total duplicated** 2 2 5 3
outside jurisdiction 19 17 44 26
withdrawn 13 12 15 9
complainant did not respond*
18 16 28 17
resolved by member** 29 26 27 16
resolved by agreement - case management
16 14 24 14
resolved by agreement - conciliation conference
6 5 9 5
resolved by agreement - panel case management
2 2 1 1
finalised by agreement 0 0 0 0
in favour of complainant 4 4 7 4
in favour of member 2 2 8 5
total 111 100 168 100
* ‘Complainant did not respond’, refers to when the complainant did 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.
Rounding of some figures has taken place.
managed investments
69
stockbroking
open stockbroking complaints at the
end of 2007
no. %
investigation pending 24 37
complaints under investigation 24 37
complaints with adjudicator 8 12
complaints with panel 8 12
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. %
standard of member service 23 38 14 27
inappropriate advice 13 21 18 35
misrepresentation 1 2 2 4
non-disclosure – risk 1 2 0 0
non-disclosure – fees/charges 2 3 1 2
non-disclosure – conditions & warnings
0 0 1 2
non-disclosure – tax/social security 0 0 0 0
share transaction – misunderstanding 18 29 13 26
technical problems 3 5 2 4
total 61 100 51 100
Rounding of some figures has taken place.
stockbroking complaints fics couldn’t take on in 2007
no. %
company not involved in complaint 1 8
complainant knew all facts over six years ago 1 8
complaint lodged with another scheme 1 8
not a current member of fics 2 15
over monetary limit 8 61
total 13 100
Rounding of some figures has taken place.
what types of issues new stockbroking complaints were about
inappropriate advice
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
Rounding of some figures has taken place.
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70
stockbroking
stockbroking complaints finalised and their outcomes
2007 2006
no. % no. %
Complaint not Forwarded to Member
duplicated** 3 3 6 13
outside jurisdiction 12 13 22 49
withdrawn 13 14 3 7
complainant did not respond*
14 15 13 29
resolved by member*** 53 55 1 2
total 95 100 45 100
Case Manager
inappropriate complaint 0 0 2 5
outside jurisdiction 1 2 4 9
complaint dismissed/withdrawn
4 9 9 20
resolved by member*** 13 30 19 43
resolved by agreement - case management
22 50 7 16
resolved by agreement - conciliation conference
4 9 0 0
in favour of complainant 0 0 0 0
in favour of member 0 0 44 100
total 44 100 73 100
Adjudicator finalised by agreement 0 0 0 0
in favour of complainant 4 50 5 63
in favour of member 4 50 3 37
withdrawn 0 0 0 0
total 8 100 8 100
stockbroking complaints finalised and their outcomes
2007 2006
no. % no. %
Panel outside jurisdiction 0 0 0 0
withdrawn 0 0 0 0
finalised by agreement 0 0 0 0
resolved by agreement - panel case management
0 0 1 7
in favour of complainant 2 40 6 43
in favour of member 3 60 7 50
total 5 100 14 100
Total duplicated** 3 2 6 5
inappropriate complaint 0 0 3 3
outside jurisdiction 13 9 24 22
complaint dismissed/withdrawn
17 12 7 6
complainant did not respond*
14 9 13 12
resolved by member** 66 43 10 9
resolved by agreement - case management
22 14 19 17
resolved by agreement - conciliation conference
4 3 7 6
resolved by agreement - panel case management
0 0 1 1
finalised by agreement 0 0 0 0
in favour of complainant 6 4 11 10
in favour of member 7 5 10 9
total 152 100 111 100
* ‘Complainant did not respond’, refers to when the complainant did 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.
Rounding of some figures has taken place.
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
info@fos.org.au
gpo Box 3
Melbourne Vic 3001
contacting us
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