AFCA flags impending cost of Shield, First | Australian Markets

The Australian Financial Complaints Authority (AFCA) has flagged the degree to which it expects the Shield Master Fund, First Guardian Master Fund and United Global Capital collapses to feed by to prices within the system.

While complaints referring to financial advice appeared to have decline markedly in not too long ago years, the latest annual AFCA knowledge has confirmed that on the back of the Dixon Advisory collapse, Shield and First Guardian complaints had helped drive an 18% increase for the sector.

What is more, AFCA chief ombudsman and chief government, David Locke backed the Compensation Scheme of Last Resort (CSLR) as acceptable in such circumstances.

Releasing its 2024-25 knowledge, Locke confirmed there had been an 18% increase in complaints within the investment and advice sector to 4,193 complaints.

The good news for financial advisers dealing with into funding the Compensation Scheme of Last Resort is that their sector remains to be much less problematic that banking and insurance coverage, however the unhealthy news is the quantity of issues already on AFCA’s books.

According to Locke, the three most complained about financial merchandise total in 2024-25 have been personal transaction accounts, motor vehicle insurance coverage and credit playing cards. The high three points have been deceptive services or products info, delay in insurance coverage declare handling, and repair high quality.

“Investment and advice complaints rose 18 per cent amid a string of failures, including United Global Capital, Shield Master Fund, First Guardian Master Fund, and Brite Advisors PL,” he mentioned.

There was an allied 95% rise in complaints involving self-managed super funds (SMSF) to 1,323 complaints, accounting for a third of complaints in investments and advice. Complaints alleging failure to behave within the shopper’s best curiosity rose 124 per cent to 1,266.

“What we’re seeing in complaints is a clear pattern of conflicted advice models and the inappropriate use of self-managed super funds that ultimately isn’t in the customer’s best interest,” Locke mentioned. “This only highlights the need for the Compensation Scheme of Last Resort for victims of unlawful advice.”

Locke welcomed an enchancment in declare handling by superannuation funds, with complaints about delays in declare handling falling 39 per cent in 2024-25.

“The reduction in superannuation complaints is a positive sign that improvements are being made, but we’re still concerned that the top three issues relate to service quality and we urge superannuation funds to improve service standards,” he mentioned.

AFCA acquired more than 100,000 complaints for a second successive yr with the next being the break-down:

• Banking and finance 54,581 complaints (down 9%)
• General insurance coverage 34,231 complaints (up 17%)
• Superannuation 6,164 complaints (down 16%)
• Investments and advice 4,193 complaints (up 18%)
• Life insurance coverage 1,518 complaints (up 5%)