AFCA handles complaints about financial advisers through an external dispute resolution process, and ASIC requires AFS licensees to be members and engage in good faith. The process involves complaint lodgement, preliminary assessment, negotiation, and, if unresolved, a binding determination.
Expanded Answer
AFS licensees must be members of the Australian Financial Complaints Authority (AFCA), which provides external dispute resolution for retail clients. ASIC expects licensees to have effective internal dispute resolution (IDR) processes first, but unresolved complaints can be escalated to AFCA. AFCA’s role is to independently assess complaints and determine fair outcomes based on legal principles, industry codes, and what is considered fair in the circumstances.
In practice, a client lodges a complaint with AFCA, which conducts an initial review to confirm jurisdiction and gather information. The matter then typically proceeds through case management and negotiation, where AFCA facilitates resolution between the client and the licensee. If unresolved, AFCA may issue a preliminary assessment or proceed to a formal determination, which is binding on the licensee if accepted by the client.
Regulatory scrutiny increases where complaints escalate to AFCA due to poor IDR handling, systemic advice failures, or inadequate remediation. ASIC monitors AFCA data as an indicator of licensee conduct and compliance effectiveness. For further context, see complaints data and reporting and nothing to report: mandatory internal dispute resolution lodgement.
Why it matters
AFCA complaints can result in binding decisions, compensation, and reputational damage. High volumes or adverse outcomes may trigger ASIC scrutiny and indicate weaknesses in advice quality or compliance systems.
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Practical guidance
- Respond to complaints early through effective IDR to prevent escalation to AFCA.
- Engage constructively with AFCA processes, providing complete and timely information.
- Analyse AFCA outcomes and complaint trends to identify and remediate systemic issues.
Further reading
Unhappy clients
Fixing complaints