Financial Services Complaints Limited chief executive Susan Taylor told Good Returns she was seeing increasing numbers of complaints about former DRS members, as more advisers retired, sold their business or merged their business with other providers.
DRS’s were hamstrung, she said, by the liability gap left when they could no longer require an adviser to participate in an investigation and a new solution was needed to help better protect consumers.
Financial Markets Manager at MBIE, Tom Simcock, said the ministry was aware the liability gap affected a handful of complaints to schemes each year but consumers were not short of alternatives.
“This issue does not affect the rights of a complainant to take other action, such as through the Disputes Tribunal and the Courts. It also does not prevent participation in a dispute resolution process, provided both the consumer and the provider voluntarily agree.”
However, FSCL’s Susan Taylor said the latter relied on a DRS tracking down the adviser who had likely moved on and convincing them to take part in the complaint process. Court action could be expensive and stressful when clients were already under pressure having perhaps lost money or as was the case recently, having a sick family member who they thought they had insurance cover for but did not, she said.
MBIE’s Simcock said the ministry would be keeping an eye on the issue and continuing to discuss cases with the Financial Markets Authority as they cropped up.
Both MBIE and the FMA issued a reminder of expectations under the Code of Professional Conduct for Financial Services, which requires advisers to treat clients fairly and to act with integrity.
Advises were expected to carefully consider their duties under the code, and work with clients to resolve any complaints.
“If the two parties are unable to resolve the complaint, the FMA expects the adviser to work with their FAP’s DRS provider to consider and resolve the complaint,” said an FMA spokesperson in a statement to Good Returns.
“FAPs have an obligation to take all reasonable steps to ensure that anyone they engage to give advice on their behalf complies with their obligations under the code. The FMA expects financial advisers and their FAPs to work with DRS providers to resolve complaints. This is in relation to advice provided when the adviser was operating,” the statement reads.
The FMA said it had discussed the liability gap issue with the schemes and was helping to advise MBIE on ways to address the gap.
