Inside Money: Financial complaints up but moaning still not cost-efficient

The disputes regime was intended to primarily paper over the financial advisory and funds management loopholes. Image / Thinkstock

The financial moan index rose over the last annual reporting period with three of the four complaints bodies in the sector registering a significant increase in whinging-based activities.

According to the annual reports of the complaints organisations - the Insurance and Savings Ombudsman (ISO) , Financial Services Complaints Ltd (FSCL) , and registered complaints were up about 12 per cent, 62 per cent, and 108 per cent respectively in the 2012/13 year compared to the previous period.
The Banking Ombudsman (BO), meanwhile, recorded a 1.9 per cent jump in disputes and 5.6 per cent fall in complaints (which are referred back to the banks themselves to attempt to resolve internally).

The above figures do not include the thousands of other consumer contacts that did not make it too the official complaint stage on account of being a wrong number or obviously insane.

For example, the BO fielded just over 2,000 enquiries over the last reporting year, an increase of almost 30 per cent.

In total, the BDO, ISO, FDR and FSCL, registered 274, 274, 508 and 162 complaints, respectively.

It is unclear whether the surge in complaints reflects growing disenchantment with the financial sector or merely greater consumer awareness about the independent dispute resolution process, now in its fourth year of operation.

Prior to establishment of the financial disputes resolution regime in 2008 (introduced in tandem with new financial adviser legislation), large swathes of the industry were not covered by any formal complaints process - other than the expensive lawyer option - with only the BDO and ISO dealing with a limited number of issues in their respective industries.

Curiously, while the disputes regime was intended to primarily paper over the financial advisory and funds management loopholes, these sectors have seen very few complaints.

Of the 274 ISO complaints, for instance, one related to investment matters and eight concerned financial advisers with FSCL recording identical statistics in these sectors. FDR, soon to be relaunched as Fairway Resolution as it will no longer operate as the government-funded reserve scheme, similarly reported one funds management complaint and three against financial advisers. As expected, the BDO disputes were mainly lending-related.

Overall, the majority of financial complaints were about insurance. Together, fire and general plus health and life insurance complaints made up 92 per cent of all those recorded by the ISO, for instance.

FSCL and the ISO collected roughly $1.6 million and $2.2 million in member fees respectively in the last financial year (the FDR figures are less discernable), which if applied only to those cases that ended in dispute phase would equate to about $8-9,000 each.

Someone complained to me that cost was too high. Of course, one way to bring the average dispute cost down would be for people to complain more about their financial service providers.

However, in a complaint relating to the above figures, Trevor Slater, FSCL general manager, says the average amount doesn't take into account "excluded settlements and early resolutions". The ISO would have similar grounds to complain.

"Actual complaint costs are fixed at two levels - $1,325 or $2,045," Slater says, as FSCL charges members directly when dealing with a complaint. Over the previous financial year FSCL earned $152,789 from handling 149 disputes or an average $1025.43 per case.