Insights for participants and consumers
Financial advisers have a legal obligation to provide ‘complaints disclosure’ to clients upon receiving a complaint. This includes information about the adviser’s internal complaints process, and that the client can access a free and independent dispute resolution service if the adviser cannot resolve the complaint internally.
What happened?
Several years ago, Tom, a scaffolder, had taken out some life insurance through an adviser. Then in 2022, he said he spoke to his adviser about taking out some additional accident cover. The adviser suggested that Tom should shift his insurance from his existing insurer (insurer A) to a new insurer (insurer B), which Tom did.
When Tom tore a tendon in his ankle in 2023 and was unable to work, he thought he had the accident cover in place and would soon be able to book in surgery at a private hospital. However, when he spoke to the adviser, it turned out no accident cover had been put in place in 2022. Tom then had to wait a year for surgery through the public system.
Tom complained to FSCL assisted by his new financial adviser.
What were the parties’ views?
Tom said that the financial adviser had failed to adequately explain the cover he had in place following the move to the new insurer in 2022. He said this breached the adviser’s obligations in the Financial Markets Conduct Act 2013 and the Code of Professional Conduct for Financial Advice Services, to ensure the cover is suitable for the client and that the client understands the cover.
Tom also said that when he first raised the complaint with his adviser, they told him that you couldn’t get accident cover as a scaffolder, with insurer B. However, Tom’s new adviser said this was incorrect and scaffolders could obtain accident cover with insurer B. In any event, if Tom was unable to get accident cover with insurer B, the new adviser argued that it would have been better to keep Tom with the original insurer (insurer A), and increase/change benefits. In other words, it was not clear why moving to a new insurer was in Tom’s best interests.
Tom also said that the adviser attempted to dissuade him from complaining by saying ‘it would be expensive for Tom to engage a lawyer’.
What was the outcome of FSCL’s investigation?
We started our investigation of Tom’s complaint, and the adviser notified his professional indemnity (PI) insurer who engaged a lawyer to act on the case. After we had told the adviser we had started investigating the complaint, the lawyer made an offer to settle Tom’s complaint by a payment of $17,500.
This was loosely made up of a $15,000 payment to represent the amount that Tom may have been able to claim if he had had accident cover in place, after taking into account the premium he would have had to pay to have the accident policy in place. The $2,500 balance was compensation for the stress Tom had suffered from having to wait longer for a surgery in the public system than the wait for private surgery.
How was the complaint resolved?
We told Tom that the adviser’s offer to resolve the complaint was fair and reasonable, and the complaint was resolved.
What were FSCL’s views on the case?
We remained concerned about the allegation that the adviser had attempted to dissuade Tom from complaining. The adviser said he never made this statement to Tom, and there was no written evidence that he made the statement. Also, because we never fully investigated the complaint, we did not make any findings on the allegation.
Also, the new adviser told us that when he had spoken to the PI insurer’s lawyer, the lawyer indicated that even if the adviser had made the statement to Tom, there was ‘nothing wrong with it’. Again, because we never fully investigated the complaint, we didn’t look into whether the lawyer actually made this statement.
However, if the lawyer did make this statement, it was clearly incorrect. Financial advisers have obligations under the FMC Act and Regulations, the conditions of financial advice provider licences they operate under, and under FSCL’s terms of reference, to provide ‘complaints disclosure’ to clients upon receiving a complaint. This must include details of the adviser’s internal complaints process, and details of the adviser’s independent dispute resolution service, including a statement that using a dispute resolution service is free for the client.
