Financial advisers represented just 6 per cent of the 5,000 plus complaints lodged with the regulator over the five years to the end of 2018, new data obtained under the Official Information Act (OIA) reveals.
According to figures supplied exclusively to Investment News NZ, the Financial Markets Authority (FMA) recorded just 303 complaints against authorised financial advisers (AFAs) and regulated financial advisers (RFAs) during the five-year period.
And about a quarter (80) of the RFA/AFA complaints came from other advisers, the OIA data shows. AFAs and RFAs were also active in highlighting issues in other financial services providers, serving as the source behind 290 of the 4,713 complaints racked up by the regulator in the five years to December 31, 2018.
The ‘other provider’ category covers all financial services groups (including unregistered entities) except RFAs and AFAs.
While the FMA could not easily track all outcomes over the five-year stretch, the figures show about 20 per cent of the 747 complaints received in the nine months to the end of December last year were either baseless or not requiring a follow-up.
The FMA responded to 201 complaints and referred 108 to dispute resolutions schemes (which should be the first port-of-call for client issues with financial services providers) during the nine-month period. Over the same time, the regulator issued 68 warnings, 31 ‘guidance’ notes and made five ‘monitoring visits’ following a complaint.
Only six complaints resulted in the FMA either deregistering a financial services provider or denying registration to an entity over March to December last year. However, the regulator referred a number of complaints to other agencies including: 18 to the Commerce Commission; 16 to the Companies Office; eight to authorities such as the NZX or police; and, six to offshore regulators.
Overall, the FMA identified 50 other counts of ‘misconduct’ from the 2018 complaints but could only resolve less than half of those issues. The OIA figures show the FMA ‘remedied’ 11 misconduct cases with “follow-up recommended” while six were resolved “without FMA intervention”.
Of the other instances where the FMA has found misconduct, it categorised 25 as “not a priority issue” while eight had “no treatment available” – with the latter label not applied “where a complaint raised significant concerns”.
A further 29 complaints during the nine-month period were filed under “insufficient information”.
“The categorisation of ‘Insufficient information’ would not be used where a complaint raised significant concerns,” the FMA says. “We always follow up on complaints that raise significant concerns, even when the original complaint does not provide us with enough information to determine the appropriate course of action.”
Almost 50 of the complaints handed to the FMA during the last nine months of 2018 are still under investigation.
The regulator pushed both life insurance and banks to improve their internal ‘whistleblower’ and external complaint-handling policies in its respective ‘thematic’ reviews of the two industries.
For example, the FMA’s life insurance review published in January says: “Formal whistleblower policies were not well understood or utilised. Some policies did not have anonymous, confidential or independent channels for raising matters…
“… Where issues were identified, this was frequently as a result of customer complaints rather than the life insurer’s own monitoring processes.”
Similarly, the FMA bank culture and conduct review published last November says: “Formal whistleblower policies and other less formal reporting channels need to be accessible, confidential and comprehensive enough to identify conduct and culture issues.”
Banks are due to respond to the FMA recommendations – that include a massive overhaul of sales incentives – by the end of this month.
The Financial Services Legislation Amendment Bill (FSLAB), due to pass into law in April, also includes specific whistleblower protection for regulated financial advisers.
FSLAB protects such whistleblowers from any criminal and civil prosecution, disciplinary proceedings or job loss as a result of reporting concerns to the FMA as long as the informant “reasonably believes that a person has contravened a provision of this Act that relates to the giving of financial advice or the provision of a financial advice service”.