The Financial Ombudsman Service has updated its 2009 proposal for an industry-funded compensation scheme to take into account the ombudsman's focus on unpaid determinations.
FOS has been lobbying for a financial services compensation scheme funded by a levy on Australian financial services licensees since the release of its proposed scheme in 2009.
The original report was prepared for FOS by consulting firm Professional Financial Solutions, and the updated version makes a number of "refinements" to bring it in line with recent submissions by FOS.
The ombudsman has made recent public submissions to the Financial System Inquiry, the Senate inquiry into the performance of ASIC and the Joint Consumer Submission to the Senate Standing Committees on Economics.
A new focus for FOS since 2009 has been the high number of retail clients who have not had their determinations paid by their financial services provider (FSP).
In the five years between 1 January 2010 and 31 December 2014, FOS data shows there were 26 FSPs "unwilling or unable" to comply with 120 FOS determinations made in favour of the consumer, said the report.
"The value of the outstanding amounts awarded by these determinations was $12,686,956.69 plus interest as at 31 December 2014," it said.
This dollar figure represents 30.07 per cent of the total value awarded by FOS's investments, life insurance and superannuation 'decision makers' and 26 per cent of the total binding decisions made in the space, said the report.
Since 30 September 2014, the value of unpaid FOS determinations has increased by nearly four per cent, said the ombudsman.
"This increase was caused by the liquidation of a single financial advisory firm which could not pay compensation totalling almost $1.8 million, awarded in six determinations," the report said.
Commenting on the report, Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston said an industry-funded compensations scheme would be a 'band aid' solution.
"It does not address the systemic flaws in our industry ... [and] it also perpetuates the erroneous notion that financial advisers are responsible for product failure," Mr Johnston said.
"[The AIOFP] would like to see FOS amend their constitution to include product manufacturers in their jurisdiction and hold them responsible for mismanagement of their own products," he said.
"If a product manufacturer was faced with the option of losing their AFSL or compensate investors [in much the same fashion as advisers are] they would quickly resolve it, saving consumers and advisers enormous expense, stress and time going through the normal legal channels to get justice," Mr Johnston said.
"Of the 167 failed, frozen or impaired funds since 2006 over 80 per cent of them were owned by institutions who remained in business and had the capacity to compensate," he said.
The full updated FOS report is available on the FOS website.
A multinational investment bank has become the latest institution to go green, promising to become a “net zero bank” by 2050. ...
The coronavirus pandemic will change how investors and the economy operate, the chief of the world’s largest asset manager has indicated, ...
The “unprecedented” package aims to prevent firms from laying off employees in order to ensure the economy “bounces back” once the t...