The consequences of clients failing to opt in under the federal government’s advice reforms need to be made clearer so as to avoid confusion and an increase in complaints to the Financial Ombudsman Service (FOS).
“We do see some issues and potential disputes about [fees],” FOS chief ombudsman Shane Tregillis said during yesterday’s Parliamentary Joint Committee on Corporations and Financial Services hearing on the advice reforms.
“Under the legislation, if you don’t renew … you do not have any right to come to FOS to raise a dispute that you have paid ongoing fees despite the fact that you haven’t renewed or may not have got any services.
“We do expect that will lead to some confusion. We expect to get a lot of people coming to FOS saying ‘we have paid fees but we haven’t got any service, we don’t understand why we’re paying those fees’.”
Tregillis said if the Future of Financial Advice (FOFA) legislation went ahead, then FOS believed the opt-in requirements needed to be made very clear.
“We cannot do anything in those circumstances; we’ll have lots of people coming to us saying ‘please help us out’ and we can’t do it,” he said.
He said the consequences of not opting in should be made very clear to clients to avoid issues where clients had not opted in but assumed they should still be receiving advice because they were still paying fees.
“Our experience of the dispute is where customers understand what the service is, what’s happening, what they’re getting, then typically that makes it [that] if a complaint comes to us, it makes it easier to deal with. Secondly, it doesn’t lead to a mismatch of expectations,” he said.
“So the issue we have, we have got some cases where in the past, renewal notices have been sent out, people haven’t responded to those renewal notices, they assume they should be getting some advice and they haven’t got that advice.”
He said from FOS’s point of view it was important that, as part of any of the reforms, the consequences of not renewing be made very clear in the renewal notice by education or by other mechanisms.
“To us it is about clarity,” he said.
