ANNUAL REVIEW 2001 - Financial Ombudsman Serviceof the Federal Minister responsible for Consumer Affairs. In 1975 he was appointed Managing Director of Berger Paints Australia, a position

A N N U A L R E V I E W 2 0 0 1

FINANCIAL INDUSTRYCOMPLAINTS SERVICE LIMITED

FICS Annual Review 2001

The Annual Review

Pursuant to the Rules of Financial Industry Complaints Service Limited, the following is the Annual Review for the period ending 31 December 2001.

Alison Maynard, Chief Executive

Report from the Chair of the Board of Directors 2

About the Board 4

Report from the Chair of the Panel 8

Chief Executive’s Report 10

About the Service 12

Insurance 19

Complaints Handling 15

Financial Planning 23

Stockbroking 28

Managed Investments 33

Education 38

Administration 39

Issues for the Future 40

Member Companies 40

Case Studies

1. Life Insurance/Denial of Claim/Panel 21

2. Life Insurance/Denial of Claim/Case Manager 22

3. Life Insurance/Denial of Claim/Panel 23

4. Financial Planning/Inappropriate Advice/Panel 26

5. Financial Planning/Inappropriate Advice/Case Manager 27

6. Stockbroking/Service/Case Manager 29

7. Stockbroking/Inappropriate Advice/Case Manager 30

8. Stockbroking – Inappropriate Advice/Adjudicator 32

9. Funds Management/Unit price misrepresentation/Adjudicator 37

1 FICS Annual Review 2001

Contents

Two thousand and one (2001) has been another busyyear. The Financial Industry Complaints Service (the Service) has experienced many more financialplanning, managed investment and stockbrokingcomplaints and again there has been a drop in thenumber of life insurance complaints. The Service now has 1766 Members (as at 30 June 2002) and I would like to extend a warm welcome to all new Members to the Service.

The Service continues to investigate the opportunitiesoffered by harmonisation with the Australian BankingIndustry Ombudsman Limited and Insurance Enquiries andComplaints Limited. A joint call centre became operationalon 21 June 2002.

The Board relies on the Rules Committee to makerecommendations to the Board in relation to changes to the FICS Rules. The Rules Committee has been busy thisyear and the Board has considered a number of changesto the Rules which are more comprehensively covered inthe Review under the appropriate heading. I thank theRules Committee for their work during the year.

The Board Finance Committee chaired by David Lidbetterhas the responsibility of reviewing the Service’s financialstatements and making recommendations in relation to thebudget and other financial matters. I thank David Lidbetterand the other members of the Committee Lynn Ralph,Alison Maynard Chief Executive and Brian de KockCompany Secretary.


Report from the Chair of the Board of Directors

The Board Communications Committee continued to contribute to the work of the Service inrelation to Communication issues. I thank the members of the Committee Tony Devlin (Chair),Heather Loewenthal, Jenni Mack and Alison Maynard.

I would like to thank the Panel Chair The Hon. Norman O’Bryan, the Adjudicator Ian Thompsonand the respective members of the Panel for maintaining the high standard in the quality of thedeterminations, particularly in the face of the increasingly complex case loads.

The Hon. Norman O’Bryan’s period of appointment expired on 30 May 2002 after six years as the Panel Chair. The Board, Management and staff join me in thanking him for his enormouscontribution to the Service and indeed the Members and the financial industry consumers.

A number of liaison meetings were held during the year to communicate with Members of theService. Meetings were also held with consumer groups, and there was ongoing liaison withASIC in particular in relation to Rule changes which occurred during the year.

I thank ASIC, the peak industry bodies and the Members for their cooperation during the year. I would like to thank the staff of the Service and the Chief Executive Alison Maynard, for theircontribution to the Service. FICS staff are dedicated professionals whose work is of great benefitto the community and the industry. I also thank the Board Members for their contribution duringthe year and I look forward to working with them during the coming year.

Peter E. Daly, Chair of the Board


The Board is comprised of eight Directors and an independent Chair appointed by the Investment and Financial ServiceAssociation Limited (IFSA). The four Industry Representatives were appointed by IFSA and the four Consumer Representativeswere appointed by the Federal Minister responsible for Consumer Affairs (the Minister).

The current person having responsibility for consumer affairs is the Parliamentary Secretary, Senator the Hon. Ian Campbell.Subsequent to recommendations of the Commonwealth Consumer Affairs Advisory Council, Senator Campbell advised that hewished to be removed from the appointment processes of FICS. At the AGM held in May 2002 amendments to the Constitution were put before the membership. Consumer Directors are now appointed by the Board, after relevant consumer organisations are given the opportunity to advise on appropriate candidates, may hold office for periods of up to three years and are eligible for reappointment.

At the AGM changes were also made in relation to industry directors. Category A, C and E Members are now required tonominate an industry body to represent the Membership Category. The Industry Association representing the largest proportionof annual levies paid to the Company is the Industry Association representing that particular Membership category and has theresponsibility of appointing Industry Directors to the Board. Industry Directors may be appointed for up to three years and areeligible for reappointment.

The Chair of the Board is now appointed by agreement between the Industry Associations in consultation with the Directorsrepresenting Consumers. The Chair may be appointed for up to three years and is eligible for reappointment.

Directors

The directors of Financial Industry Complaints Service Limited are:


About the Board

Peter E. Daly (Chair):

Appointed a director of the Company and the Chair in January 1997. He came to Australia in1980 from South Africa and was appointed the Chief Executive and Managing Director of NorwichWinterthur Group in 1983. He has held a number of directorships since then, was the President ofthe Insurance Council of Australia 1986 – 1987 and Chief Executive Officer from 1991 – 1997.

He was the Deputy Chairman of the Zoological Parks and Gardens Board and is currently theChairman of Seal Rocks Victoria Australia Pty Ltd and Insurance Enquiries and Complaints Ltd.

1. Anthony J. Devlin, B. Bus, Dip. Crim, CPA: Appointed a director of the Company 10 November 1999 as a nomineeof the Federal Minister responsible for Consumer Affairs. From 1980 to 1997 he was a Senior Investigator/FinancialInvestigator at the Corporate Affairs Commission, Australian Securities Commission, Royal Commission into the NSW PoliceService and the NSW Crime Commission. Since 1997 he has served as Financial Counsellor for Credit Line FinancialCounselling Services, an activity of Wesley Mission Sydney.

2. Daryl F. Hawkey, A.S.I.A.: Appointed a director of the Company 1 November 1999 representing industry participants.He has spent 36 years in the banking and funds management industries working with The National Australia Bank Limited,Australian United Corporation, The Commercial Bank of Australia Limited, Westpac Banking Corporation, TricontinentalCorporation, Potter Partners and Rothschild Australia. He is currently a Director of the Investment and Financial ServicesAssociation Limited where he chairs the Board Regulatory Affairs Committee and an Executive Director of Rothschild AustraliaAsset Management Ltd where he is head of Legal and Compliance.

3. Cr. Anthony Issa, OAM: Appointed a Director 22 November 2000 as a nominee of the Federal Minister responsible for Consumer Affairs. He is currently a self-employed company director of Comet Building Services Pty Ltd. He is Chairman of the Corporate Services, Sister Cities and Local Ethnic Affairs Policy Committees for the Parramatta City Council. He has been awarded an Order of Australia medal for community service.

4. David W. Lidbetter, B.Sc., Dip.Scc Inst.: Appointed a director of the Company 10 November 1999 as a nominee of the Federal Minister responsible for Consumer Affairs. In 1975 he was appointed Managing Director of Berger PaintsAustralia, a position he held until 1980 when he was appointed Supervising Director and Chief Executive of the parentgroup Berger Jenson & Nicholson and was responsible for operating companies worldwide. In 1986 he retired to focusmore time on private interests. He has played a part in community work and in 1986 was appointed as CommunityRepresentative on the Sydney Airport Community Forum and various airport committees.


About the Board

1 2 3 4

5. Heather Loewenthal, BSc(Psych)Hons/LLB;FAICD(UNSW): Appointed a director of the Company in November 1999and has extensive experience in the financial services and banking industry. Ms Loewenthal is currently Head of Compliance(Business and Consumer Banking) for Westpac Banking Corporation. In 1998 and 1999 she was a Board Committeemember of the Regulatory Affairs Committee of the IFSA Board. In 2001 and 2002 she was elected President of theAssociation for Compliance Professionals of Australia (ACPA).

6. Jenni Mack, BA: Appointed a director of the Company 10 November 1999 as a nominee of the Federal Ministerresponsible for the Consumer Affairs. Ms Mack has extensive consumer affairs and complaints handling experience. She is aformer Executive Director of the Consumer’s Federation of Australia, the peak consumer body. She was also the Deputy LegalServices Commissioner in NSW responsible for handling complaints about lawyers. She currently represents the communityon the NSW Judicial Commission and the Migration Agents’ Registration Authority’s complaints panel. She is a member ofthe Australian Securities and Investments Commission’s Consumer Advisory Panel and is completing a Masters degree inAdministrative Law at Sydney University.

7. Adj. Prof. Wes A. McMaster, CFP, FAICD: Appointed a Director of the Company 16 February 2000 representingindustry participants. Professor McMaster is currently a director and the principal of McMaster Securities Pty Ltd, consultantsto the financial services industry and has managed his own financial planning practice, has been Chief Executive Officer oftwo national financial planning firms and is a former Chairman of the Financial Planning Association of Australia. ProfessorMcMaster is a director of GLS Business Rewards Pty Ltd and Client Automated Processes Pty Ltd, and also holds the positionof Adjunct Professor (Financial Planning) at RMIT University.

8. Lynn S. Ralph, BA, MBA, MAICD: Appointed a director of the Company 30 October 1998. Ms Ralph is the inauguralChief Executive Officer of the Investment and Financial Services Association and spent over 10 years in funds managementworking for Bankers Trust Australia, CRA Limited and McIntosh Securities Limited. As Deputy Chairman of the AustralianSecurities Commission from 1993 – 1997, she led the “Good Advice” project, a major review of the investment Advisoryindustry. She is currently a Director of the AFL (NSW/ACT) Commission Ltd. Ms Ralph has also been a Director of NRMALimited, NRMA Insurance Limited, the Australian Choreographic Ensemble, as well as Chairman of the Centennial Park and Moore Park Trust.

Alternate Directors Ingrid Gubbay: Appointed by Jenni Mack as her Alternate 9 August 2000 and is currently a solicitor in the Consumer Law Unit with the Legal Aid Commission (NSW).

Adrian Holst, BSc, BCom, FCPA, FSIA: Appointed by Wes A McMaster as his Alternate 8 March 2000. He is currently a stockbroker with FW Holst & Co Pty Ltd.


5 6 7 8

About the Board

Responsibilities of the Board

Apart from the responsibility to manage the business of theCompany in accordance with the Constitution, the Boardalso has responsibilities for the Service.

These responsibilities include overseeing the activities of theService, ensuring the Service’s independence, appointing the Panel Chair and Adjudicator, ensuring that the Paneland Adjudicator adhere to the Rules, analysing statisticalinformation, commenting if appropriate in the AnnualReview, ensuring adequate funding, effecting changes to the Rules, ensuring the Service maintains its status as anapproved scheme and identifying systemic issues andserious misconduct.

The Board must also commission an independent review of the Service every three years. The Review must address theService’s progress in meeting Government benchmarks,whether the scope of the Service is appropriate, satisfaction ofMembers and Complainants, whether procedures are just andreasonable, public awareness of the Service, whether accessto the Service is equitable and the effectiveness of the Rules.

An independent review of the Service commenced in 2002.The reviewers appointed are Community Solutions jointlywith the University of Western Sydney School of Law and La Trobe University.

Board Activities

The Board met five times during 2001, two meetings wereheld in Melbourne, two in Sydney and another in Brisbane.With the meetings outside Sydney and Melbourne the Boardholds functions for industry members and consumerrepresentatives.

Finance Committee

The Board Finance Committee comprised of David Lidbetter(Chair), Lynn Ralph, Brian de Kock (Company Secretary)and Alison Maynard (CE), met five times during 2001. The Finance Committee is responsible for reviewing thebudget before it is submitted to the Board, commenting on quarterly financial statements and reviewing performance in relation to the budget during the year. The Committee also reviews the Annual Accounts and meets with theService’s auditors.

Communications Committee

The Board Communications Committee comprised of TonyDevlin (Chair), Jenni Mack, Heather Loewenthal and AlisonMaynard (CE) met four times during 2001. Early in the yearthe Committee received a research report in relation toawareness of FICS by the Members and communityagencies likely to refer consumers to FICS. A plan of actionin relation to the findings of the report was prepared andactivities undertaken during the year to improve Memberknowledge and awareness and community organisationawareness of the Service.

Service Appointment Processes

The Board has initiated changes in the Service’sappointment processes and during 2001 and early 2002the Service’s Rules were changed;

● The Board now appoints the Panel Chair. Under theprevious Rules this function was performed by IFSA.

● Consumer appointments to the Panel are now made by the Board with input from relevant consumerorganisations.

● Industry associations nominated by Category A, C and EMembers now appoint industry Members to the Panel.

At the Annual General Meeting in 2002 the Service’sConstitution was also changed:

● The independent Chair of the Board is now appointedby agreement with the Industry Associations representingMembership Categories A, C and E in consultation withthe Consumer Directors.

● Consumer Directors are now appointed by the Boardafter relevant consumer organisations are given theopportunity to advise on appropriate candidates.

● Industry Directors are now appointed by the IndustryAssociations nominated by the Members of CategoriesA, C and E.


About the Board

The year 2001 saw a significant increase in the number of complaintsreferred to the Panel for determination. For convenience I shall differentiatebetween Panel 1 and Panel 2. Panel 1 comprised Iain Ross (IndustryRepresentative, represented the interests of life insurance companies), John Berrill (Consumer Representative, represented the interests of consumersuntil his retirement in June), Stephen Duffield (Consumer Representative,represented the interests of consumers from 1 July) and myself as anindependent Chair.

Panel 1 met on 25 occasions (34% increase on 2000) and determined 114complaints. On a number of occasions Panel 1 convened a formal hearing or delivered an interim determination before finalising the complaint. Thirty-four percent of the complaints were upheld.

Panel 2 comprised John Berrill until his appointment expired, Stephen Duffieldfrom 1 July, Tony Muston (Industry Representative, represented the interests ofthe financial planning industry) and Barry Murray (Industry Representative,represented the interests of the stockbroking industry as required) and myselfas an independent Chair.

Panel 2 met on 12 occasions and determined 34 complaints (20 involvingFinancial Planners, 14 involving Stockbrokers). Thirty-three percent of thecomplaints were upheld.

The total number of complaints referred to the Panel was 148 (an increase of 24%). A majority of the complaints were lodged with FICS by Complainantsin 2000 or 2001 (119).

Objections to Jurisdiction

The Panel noted with some concern an increasing number of objections to the jurisdiction of the Service to conciliate and arbitrate a complaint raised by Members. No criticism is made of Members who did so. The problem liesin the construction of the relevant rules: Rule 12 and 14. It is understandablethat some Members of the Service should object to the Service accepting a complaint because it is arguably not the type of complaint covered by Rule 14, or is excluded because the dollar value of the claim exceeds the limits set out in Rule 12.

Objections to jurisdiction are decided finally by the Chair of the Panelpursuant to Rule 40. I hold the view that, if reasonable doubt exists whetherthe Service has jurisdiction, the Panel should not decide a complaint. A Member affected by an adverse decision on jurisdiction is probably entitledto pursue its rights in the courts before arbitration notwithstanding Rule 37, in my opinion. Members have agreed to abide by the Panel’s decisions made within jurisdiction.


Report from the Chair of the Panel

The Board may amend the Rules of the Service in accordance with Rule 60. Regrettably in 2001 the Rules Committee wasunable to reach a consensus about appropriate amendments to Rule 12 in relation to the definition of the monthly limit forincome stream risk policies. Rule 6 which deals with who may use the Service and Rule 14 might also be reconsidered by theRules Committee in the light of experience gained since the Service expanded its role to deal with complaints in the financialservices industry.

Life Insurance

The Panel has little to report in relation to life insurance complaints.

The Panel continues to receive inadequate final submissions from some Members of the Service. It is a matter of concern thatsome Members regard the complaint simply as a nuisance and do not seek assistance from qualified staff in the preparation of a comprehensive submission. A further concern is delay occasioned by neglect of the Member to respond to requests from the Panel for documents and reports, particularly from agents. Delay also occurs in the delivery of a final submission outside the time period required by the Rules. Perhaps an appropriate sanction should be penalty interest when a complaint is upheldmonths later than it would have been without inordinate delay: Section 57 Insurance Contracts Act 1984; Rule 35.

The quality of the medical evidence provided to the Panel during 2001 improved. However, in complaints concerned with medicalmatters the Panel is often faced with a difficulty when it determines that a benefit terminated, say some 2 years or more before thehearing, should be restored. The Panel does not have up-to-date medical and other evidence to allow it to assess for how long thebenefit should be paid. Often, as a matter of fairness to the Complainant, a rather arbitrary decision has to be made.

Other Complaints

The task of Panel 2 in 2001 was onerous because of the complexity of many complaints. It was necessary for the Panel to seekprofessional advice on financial services industry law and practice on several occasions. The resultant advice was generally of a high quality and most helpful to the Panel.

Thanks

The Panel wishes to record its appreciation of the duties performed by John Berrill as a Member of the Panel for almost 6 years.His knowledge of the law and superannuation matters and his enthusiastic contribution was much appreciated by the Panel.

As Chair of the Panel I record my thanks to all my colleagues for their considerable help during 2001. Stephen Duffield quicklybecame a useful member of the Panel as a consumer representative.

The Panel also wishes to record its appreciation to Paul Bean who retired from the Office of Chief Executive of the Service earlyin 2001. Alison Maynard, the new Chief Executive, has been energetic in familiarising herself with Panel activities and the Panelthanks her for her assistance throughout most of 2001. Stephen Bray, the Liaison and Technical Support Manager, Case Managers and staff have provided valuable support to the Panel throughout the year.

Norman M. O’Bryan, Chair of the Panel


Report from the Chair of the Panel

It has been an active year for the Service, again with the emphasis on the integrationof the new categories of complaint dealt with by the Service. It is interesting to notethat in the last half of 2001 the number of non-life insurance complaints exceeded the number of life insurance complaints which have to-date dominated the work of the Service.

As a result of the integration of the new types of complaints the case managementand statistical reporting required significant alteration and a decision was madethat the existing system could no longer cope. Investigations of other suitable casemanagement systems were undertaken and the Service has decided to adopt asystem based on the case management system used by the Australian BankingIndustry Ombudsman. Installation of the new system will occur during 2002.

Harmonisation

Harmonisation with the Australian Banking Industry Ombudsman and InsuranceEnquiries and Complaints Limited has been a focus for the Service during 2001.The decision has been taken to participate in a joint call centre which will receiveall consumer enquiries to the Services on one single telephone number.

Systemic Issues

Since approval of the Service by ASIC pursuant to Policy Statement 139 theService has the responsibility for identifying, recording and reporting systemicissues and serious misconduct. During the year procedures developed by theService have entailed the Service raising several systemic issues with Members and working towards a resolution of the issue with the Member whilst maintainingthe Service’s obligation to report the circumstances of each issue. It has not beennecessary to identify any Members to ASIC.

Rules

There have been changes made to the Rules. Rules 63 and 65 dealing with systemicissues and serious misconduct were altered to provide for new procedures to be putin place for systemic issues and serious misconduct. A new Rule 7 was also adoptedwhich clarifies Member’s responsibilities in relation to notifying consumers about the Service. Rule 12 in relation to monetary limits of the Service was also underconsideration but has not yet been altered.

New Rules 42, 43, 45, 46, 48 and 60 were also adopted to provide for the Boardto take the place of the Minister responsible for Consumer Affairs in relation toappointments of Panel Chair, Adjudicators, and Consumer Representatives.Agreement in relation to these changes was reached during 2001 but the changesthemselves were not made until early 2002, coming into effect on the 7th April 2002.

Also under consideration during 2001 were the Rules in relation to industryparticipation in the appointments of the Panel Chair, Adjudicator and IndustryRepresentatives on the Panel. These issues were resolved during 2002, and havebeen previously described in this report under “About the Board”.


Chief Executive’s Report

Complaints

During the year the number of new written complaints inrelation to insurance dropped from 618 to 588, there werehowever increases in the other complaint types. Financialplanning complaints rose from 83 in 2000 to 186 in 2001,stockbroking increased from 88 to 134 and managedinvestments complaints rose from 23 to 80. Total newcomplaints received for the year rose from 812 in 2000 to988 in 2001. The Panel determined 148 complaints with36% in favour of Consumers and 64% in favour ofMembers, the Adjudicator determined 27 complaints with44% in favour of Consumers and 56% in favour of Membersand the Case Managers finalised 687 complaints with 39%in favour of Consumers and 61% in favour of Members.One hundred and seventeen (117) insurance complaintswere referred to the Panel, of these three were settled and114 were dealt with by the Panel and a differentlycomprised Panel dealt with 34 complaints in the non-insurance area. At times this Panel would be comprised of a representative from the financial planning industry oralternatively a representative from the stockbroking industry.The work of the Adjudicator was partly performed by myselfhowever the alternate Adjudicator Ian Thompson handledthe majority of the Adjudications.

The Service adopted new procedures for initiatingcomplaints, including the adoption of a complaint form. It also instituted a Privacy Policy which is available on theFICS website, and prepared privacy brochures to bring theService in line with privacy requirements. The Service alsoconducted a review of its fee structure and made alterationsto the 2002 fee and levy system, arising from the reviewand which have been communicated to Members. Insummary it was decided to move to a fee structure based on60% levy to 40% complaint fees, with the levy being sharedequally between Member categories A, C, E and F.

Liaison

A number of liaison meetings with Members took placeduring the year. These were held in Sydney, Melbourne and Brisbane, and the meetings discussed the currentoperations of the Service, the FICS Rules and current issues. The meetings were well attended with approximately 80 people attending each meeting.

Issues

The Service will be required to deal with changes arising outof the Financial Services Reform Act. In particular becauseany financial service provider dealing with retail clients isrequired to be licensed and be a member of an externaldispute resolution service. The Service has also beenrequired to deal with issues arising from the revocation of Members’ licences by ASIC and the repercussions when a Member goes into Administration or worse still intoLiquidation. Solutions to these issues will be sought during2002. Issues for the coming year will include reviewing the Panel operations with a view to improving Panelcomplaint handling times.

Independent Review

A major focus for the Service during 2002 will be theindependent review of the Service being conducted byCommunity Solutions jointly with the University of WesternSydney School of Law and La Trobe University.

Thanks

I would like to thank the Panel, the Honourable NormanO’Bryan, John Berrill, Stephen Duffield and Terry Lynch,Consumer Representatives Iain Ross, Tony Muston and BarryMurray, and Industry Representatives for their contributionduring this year. The Hon. Norman O’Bryan retired in May2002 after six years service as Panel Chair; his departurewill truly be a loss to the Service. He has been invaluable in establishing the reputation of FICS, and in particularensuring that procedures are in place to accord proceduralfairness to the parties. I would also like to thank the secondAdjudicator Ian Thompson for his quality contribution to the Service. I would like to thank the staff for their ongoingcommitment and hard work during the year and also themembers of the Board for their support and contribution to the Service during the year, in particular the Chair of the Board Peter E. Daly for his guidance and support .

Alison Maynard, Chief Executive


Chief Executive’s Report

The Financial Industry Complaints Service Limited came intobeing on 26th October 1999, however, the underlyingScheme has been in operation since 1991 and was formerlythe Life Insurance Complaints Service (LICS). The Serviceresolves complaints relating to the members of the financialservices industry including life insurance, superannuation,funds management, stockbroking, financial advice,investment advice, and sales of financial investmentproducts. The Service currently deals with personalsuperannuation products sold by life insurance companies.Other superannuation disputes are dealt with by theSuperannuation Complaints Tribunal.

Mission Statement

The mission statement of the Service is:

to encourage and assist consumers and members to reconcile any differences by way of an effectivealternative dispute resolution service in accordancewith the Rules in such a manner as to retain aworking relationship between the parties.

Constitution and Rules

The Service is governed by a Constitution and Rules. The Constitution sets out the objectives of the company andgoverns the operations of the company. The Rules, on theother hand, provide the detail on how the Service will dealwith complaints. The Constitution of the company may onlybe changed at a General Meeting however the Rules of theService may be changed by the Board. This will be doneafter the Rules have been considered by the Rules Committee.

The Rules Committee

The Rules Committee was formed in early 2000 to be a consultative body representing the stakeholders of the Service. It has the ability to make recommendations to the Board in relation to the Rules of the Service and allproposed changes to the Rules must be considered by thiscommittee. The current members of the Rules Committee areDavid Mico, IFSA, Andrew Wong, IFSA, June Smith, FPA,Doug Clark, Securities & Derivatives Industry Association,Ingrid Gubbay, Legal Aid, NSW and Jenni Mack who isalso a Board member. Michael Funston and Phillip Frenchdeparted the Committee during the year. The Constitution of

the committee fulfils the Service’s obligation to consult widelywith the Service’s stakeholders, including different industryand consumer groups in relation to changes to the Rules.

The Rules Committee has been meeting regularly to considerthe Rules and has made recommendations to the Boardduring 2001. In particular Rule 7 has been amended toplace an additional responsibility on category A Members(life insurers) to notify consumers receiving any adversedecision about a claim about both internal complainthandling and FICS. The amendments to this Rule also clarifythat all Members must advise Complainants about theavailability of FICS at the same time as advising theComplainant of the outcome of a complaint.

New Rules 63 and 65 have been changed to simply statethat the Service will have procedures in place for dealingwith systemic issues and serious misconduct. The Service has now adopted underlying procedures. Also consideredby the Rules Committee during 2001 (however not passedby the Board until early 2002), were the Rules dealing withthe involvement of the Federal Minister responsible forconsumer affairs in the appointment processes of FICS; in particular the appointment of consumer representatives,Panel Chair and the Adjudicator. The amendments providethat the role of the Minister is replaced by the FICS Board.The Rules of the Service are available on the FICS website at www.fics.asn.au.

Scheme approval by ASIC

FICS was approved by ASIC in October 1999 pursuant to ASIC Policy Statement 139 which provides the guidelinesby which ASIC will access the Scheme for approval.

The guidelines address the areas of accessibility,independence, fairness, accountability, efficiency andeffectiveness. ASIC must also be consulted when any changesto the Service’s Rules or Constitution are being considered.

Systemic Issues

FICS has a responsibility to identify systemic issues andcases of serious misconduct that arise from complaints, refer these matters to the relevant Member(s) for responseand action and report information about the systemic issueor serious misconduct to ASIC in accordance with agreedguidelines and thresholds.


About the Service

A systemic issue is one that may have further implications for a Member or the industry beyond the immediate actionsand rights of the parties to the complaint. Whilst severalcomplaints of the same type may indicate a systemic issue, it is not enough to define or classify a systemic issue byreference only to the number of complaints the Service mayreceive. A systemic issue can be identified by onecomplaint; this is because the effect of the particular issuewill clearly extend beyond the parties to the complaint.

Rule 63 of the FICS’ Rules provides that, “The Board mustensure that FICS has procedures in place for dealing withsystemic issues and serious misconduct”.

FICS has an obligation to report systemic issues to ASICunder Policy Statement 139, however FICS is able to do this without identifying the Members if the issue has beenaddressed by the Member.

It is pleasing to note that on a number of occasionsMembers have been rectifying issues that may be systemicproblems without a formal referral being made by FICSunder Rule 63. FICS has found that once the problem isbought to the attention of a Member, usually by a FICS casemanager, they are taking the initiative and reporting to FICSonce they have dealt with the problem. During the 2001calendar year, four systemic issues were resolved in thisway, whilst nine formal referrals were made.

Some systemic issues dealt with during 2001 are:

Payments withheld while insurer investigating Non-Disclosure in relation to an Income Protection Policy

This complaint concerned the actions of the Memberwithholding payment in relation to an income protectionpolicy while it investigated issues of non-disclosure. In theopinion of the Service the policy wording did not give theMember the right to withhold these payments.

The complaint was resolved by the Member reinstatingpayments whilst it conducted its investigation. The Serviceraised the issue with the Member pursuant to Rule 63. The Member explained its actions and disagreed that it was a systemic issue believing it to be widespread industrypractice, however it agreed that the policy wording might be ambiguous. It agreed to take the Service’s comments into account when the policy wording was next reviewed.

Agent Training and Complaint Handling

During the investigation of this complaint, an insuranceagent admitted that he did not make the client aware of hisobligation to make disclosure during the period from whenthe proposal was lodged to when the insurer signed off and accepted the policy. There was also evidence of poorcomplaint handling by the Member.

The following issues were raised with the Member pursuantto Rule 63.

a) Is there potential for similar problems to arise in relationto policies sold by this agent?

b) Is this problem confined to one agent?

c) Are the Member’s agent training procedures adequate?

d) Was the complaint handling by the Member in accordancewith the Australian Standard as required by Rule 7?

The Member responded and agreed that there was potentialfor similar problems to arise in relation to policies sold bythe agent, and advised that the agent was no longer usedby the Member.

The Service asked for an undertaking in relation to policiessold by this agent that, where a non-disclosure issue arose in the period from when the proposal was lodged to whenthe insurer signed off and accepted the policy, these claimswould be admitted provided there were no other grounds for denial. The Member replied stating that while they wereunable to give a “blanket” undertaking, if they did receive a claim identical to this complaint then they would certainlyadmit it. The Service is still pursuing this and the other issuesraised with the Member.

Clear Definition of Transaction Fees

This complaint concerned the Complainant’s misunder-standing of an on-line broker’s fee. He did not understandthat an order could only consist of one security. According to the Member, this was the only complaint it had receivedin relation to the issue, however, in view of the complaint ithas now included a definition of the term “order” in thedefinition section of its terms and conditions on its websiteand its pricing schedule is also being updated to define theterm “order”.


About the Service

This is a complaint where the Service had not yet raised the issue in terms of Rule 63, yet the Member took remedialaction without that request.

Computer Error in Relation to Surrender Value on a Child’sAdvancement, Whole of Life Policy

This complaint arose out of an incorrect overstatement of thesurrender value on a policy. This issue was verbally raisedwith the Member as a possible systemic issue. A formalrequest under Rule 63 had not yet taken place. The Memberresponded that the problem was caused by data corruptionand details of the proposer and the life insured having been confused. The problem had the effect of considerablyoverstating the surrender value shown in the system and also on statements issued.

The Member, to overcome the problem, had previously takenpreventative action, however, not all the policies that had the problem were identified and the policy subject of thiscomplaint was one of them. The Member responded byconducting further systems checks and is now positive thatall affected policies have been identified. An explanationwas sent to all of those clients along with an amendedstatement providing the correct surrender value of the policywith an apology for inconvenience caused.

Consequences of Withdrawal from Annuity

This complaint concerned lack of advice to the consumerabout the tax consequences of making a withdrawal from an annuity. Without this issue being raised with the Memberpursuant to Rule 63, the Member advised that the annuitywithdrawal form had been amended to include an importantinformation box which emphasised the importance ofmaintaining the tax effective investment.

It stresses the need for the client to possibly look at otherbetter withdrawal alternatives, as withdrawing from theinvestment may not be in the client’s best interest. It suggests that clients should talk to an investment advisorbefore withdrawing and it also explains the impact of these withdrawals including reference to withdrawal fees and adjustments to the remaining income stream.

Warning in Relation to Cancellation of Policy

The Complainant in this case was paying for a policy via direct debit and did not receive written notice of thecancellation of a policy when the policy lapsed due tofailure of the insurer to receive payments via the direct debit.The Member’s customer information brochure provided thatif a premium was not paid, then the policy owner wouldreceive 30 days written notice of the lapsing of the policy.

In this particular case the policy was reinstated upon paymentof premium arrears. The Member admitted that although itsends up to three direct debit dishonor letters to a clientbefore a policy is lapsed, none of the letters provides awarning that the policy will lapse within 30 days if paymentis not made. As a consequence of this complaint, but withoutthe Service raising the issue pursuant to Rule 63, the Memberof its own volition ensured that systems and procedures wereamended to ensure that clients who pay by direct debit aregiven the same warning of impending lapse as is provided to clients who pay premiums direct to the company.


About the Service

The Service is a national service which is free to consumers,however Members must pay an annual levy and complaintfees. The Service operates through a process of investigation,negotiation, conciliation and arbitration. Investigation,negotiation and conciliation are carried out by the individualcase managers and the majority of cases are settled by thismethod. If a case cannot be settled the complaint will bereferred to the Panel which is made up of an independentchair, an industry representative and a consumerrepresentative. If the complaint is not complex and is lessthan $10,000 it will be referred to the Adjudicator.

The Panel or Adjudicator invites the parties to makesubmissions and the Liaison and Technical Support Managerwill assist the Complainants to prepare their submissionupon request. In most cases consideration of the complaintoccurs on the information provided by the parties but if thePanel or Adjudicator requires, the parties may appear eitherin person or by way of a telephone video conference. The Panel or Adjudicator are not investigators nor are theyadvocates for either party. The determination made by thePanel or Adjudicator is binding on the Member, decisionshowever are not binding on the Complainants who mayseek legal or other remedies that may be available to them.

Complaints process

1. Complainant contacts Enquiries Officer.Resolved by Enquiries Officer.

2. Advised to put complaint in writing to the Member.Resolved by agreement.

3. No resolution by Member or 45 days elapses; then

4. Completed complaint form sent to Case Manager for investigation/negotiation/conciliation.

Resolved by conciliation.

5. Chief Executive reviews case and either refers the matter to the Panel or the Adjudicator.

Referred for arbitration.

6. Panel or Adjudicator (less than $10,000 and non-complex), makes a decision binding on Member but not Complainant.

Telephone Enquiry Service

The Service offers an enquiries service in relation to lifeinsurance, financial planning, stockbroking and managedinvestment issues. Consumers call a 1300 number directedto the Service’s Enquiry Officers. If the caller has acomplaint and they have not referred the complaint to theMember’s internal complaint handling system then they willbe advised to do so and to return to the Service if notsatisfied with the outcome of that process. All Members of the Service are required by Rule 7 to have an internalcomplaints handling system to the Australian Standard. They are also advised that there is a 45 day time limit on the Member’s internal complaints system.

The Service has two Enquiries Officers. Joseph McCarthy, has been with the Service since 1994. Prior to commencingwith the Service he spent many years as an investigator andconsumer consultant. He also spent approximately four yearsin the life insurance industry in underwriting, sales andinvestigation. Colleen Staun came to the Service from theFCSRS on 1 January 2000, having previously worked as an insurance consultant for RACV, a customer service officerfor Optus and an insurance consultant for GIO.

2000 2001No. % No. %

Enquiries 7,737 69 7,151 67

Complaints 3,514 31 3,481 33

Total 11251 100 10632 100

Telephone Contacts

This table indicates the total number of telephone callsrecorded. Telephone calls decreased by 6%. Enquiriesdecreased by 8% and complaints by 1%. The number oftelephone enquiries received is different from the number oftelephone complaints received. It is only when a telephonecall is about a specific complaint that it is recorded as acomplaint. Typical enquiries which are not recorded ascomplaints might be: “I’ve been given this information by myinsurer/planner/dealer, is it correct?”; “Is a broker, planner,insurer, dealer a Member of the Service?”; “How do I get in contact with a particular Member?”; “What is FICS?”; “Is it a government body?” Also any complaints which are outside the jurisdiction of the Service and are referredelsewhere are recorded as enquiries.


Complaints Handling

Telephone Referral Statistics

Referral Source 2000 2001No. % No. %

Agent/Broker 173 5 105 3

ASIC/ACCC 4 0 11 0

Consumer Affairs Bureaux 27 1 15 1

Community Groups 13 0 6 0

Friend (includes Relative) 59 2 37 1

Insurance Enquiries and Complaints Ltd, Insurance Council of Australia 170 5 185 5

Insurance Company 669 19 1,075 31

Media (Newspapers, Magazines, Television, Telephone Directories) 1,299 37 996 29

Member Company (non-insurance) 63 2 86 2

Members of Parliament 17 0 11 0

Ombudsman (Commonwealth/State) 44 1 23 1

Professional Bodies 956 27 912 26

Superannuation Complaints Tribunal 20 1 19 1

Total 3,514 100 3,481 100

Referral Sources

The major referral sources for telephone complaints wereMembers 33%, media (including telephone directories) 29% and professional bodies such as the FPA at 26%.

Nature of Telephone Complaints

These telephone call statistics are recorded because they arecomplaints not just enquiries.

The major cause for a telephone complaint is standard ofservice, for example, delay in assessment of a claim, failureto supply documents upon request, failure to amend recordsetc. This was the top category at 39%, denial of claim camesecond at 29%, policy terms and conditions at 11% and misrepresentation came in at 9%.

Nature of Complaint 2000 2001No. % No. %

Denial of Claim 939 27 1,006 29

Inappropriate Advice 34 1 73 2

Misrepresentation 410 12 319 9

Failure to supply ASG 0 0 0 0

Non-Disclosure 18 1 21 1

(Non-Disclosure) – Conditions & Warnings 2 0 6 0

(Non-Disclosure) – Fees/Charges 13 0 39 1

(Non-Disclosure) – Risk 3 0 1 0

(Non-Disclosure) – Tax/Social Security 6 0 17 1

No Written Plan 2 0 0 0

Policy Values/Charges 280 8 185 5

Section 85 – Know your product/client 0 0 0 0

Standard of Company Service 1,244 35 1,366 39

Share Transaction – Misunderstanding 53 2 67 2

Customers with Special Needs 4 0 0 0

Technical Problem 1 0 0 0

Policy Terms and Conditions 505 14 381 11

Total 3,514 100 3,481 100

Types of Products – Telephone Complaints

The main categories of product which were involved intelephone complaints were Income Protection Policies at31%, Total and Permanent Disability at 16% and TermInsurance at 12%. A typical financial planning disputewould be categorised under investment single premium inthe table, although it may also appear under the managedinvestments categories.


Complaints Handling

Types of Products 2000 2001No. % No. %

Allocated Pension 15 0 6 0

Deferred Annuity 10 0 3 0

Endowment 398 11 201 6

Immediate Annuity 26 1 15 0

Investment Annual Premium 405 12 381 11

Income Protection 805 23 1,073 31

Investment Single Premium 307 9 481 14

Master Trusts 7 0 3 0

Managed Investments – Bond 7 0 2 0

Managed Investments – Cash 8 0 15 0

Managed Investments – Currency 1 0 0 0

Managed Investments – Share 21 1 30 1

Share – Derivatives Warrants 52 1 69 2

Superannuation – Company 5 0 0 0

Superannuation – Personal 10 0 11 0

Term/Temporary Insurance 541 16 421 12

Total & Permanent Disability 476 14 554 16

Trauma 75 2 50 2

Unit Trusts – Property 4 0 3 0

Whole of Life 341 10 163 5

Total 3,514 100 3,481 100

Written Complaints

The total number of new complaints received by the Serviceduring 2001 was 988, of which 588 concerned lifeinsurance, 186 financial planning, 134 stockbroking and80 managed investments. There were also 110 complaintsre-opened during the year. This compares with 812 newcomplaints received during 2000 and 102 complaints re-opened. A re-opened complaint is a complaint which aCase Manager believes has been finalised (usually becausethe Complainant has failed to respond to correspondence),but the Complainant contacts the Service to re-open thecomplaint. The complaints finalised for the relevant years are971 for 2001 and 849 for 2000. The figures demonstrate a drop in the life insurance complaints from 618 to 588.The overall annual complaint figure increased by 22% as aresult of an increase in the financial planning, stockbrokingand funds management complaints.

Total Complaints 2000 2001

Active at start of period 338 403

Complaints re-opened 102 110

New Complaints received 812 988

Complaints finalised 849 971

Active at end of period 403 530

Role of Case Managers

The role of investigation and negotiation is carried out bythe Service’s five full-time Case Managers. Dennis Cooper,who worked in the life insurance industry for 32 yearsbefore joining the Life Insurance Federation of Australia(LIFA) Enquiries and Complaints Service in 1992 (which laterbecame LICS then FICS). Alan Smith spent 31 years in thelife insurance industry, including management of customerservice, superannuation, trusts, underwriting and claimsbefore joining LIFA in 1992 as a Customer EnquiriesManager. John Plunkett has been with the Service sinceNovember 2000. Prior to that he was involved in thefinancial planning industry , merchant banking and haspreviously worked for the Australian Securities Commission.He has a commerce degree and is undertaking a diploma of financial planning. In April 2001 the Service appointedBruce Foskey as a Case Manager.


Complaints Handling

Mr Foskey has a background in stockbroking, having beenboth a dealer and an analyst. His knowledge and skillscontribute to the Service’s handling of complaints concerningstockbrokers. In November 2001, the Service appointedTrevor Slater as a Case Manager. Mr Slater was theNegotiations Manager, Customer Relations at AMP and had been at AMP for nine years. He is a qualifiedmediator, negotiator and trainer and is currently undertaking the Graduate Diploma of Conflict Resolution at LaTrobe University.

The majority of complaints received by the Service areresolved by the Case Managers. It is considered desirablefor complaints to be resolved by negotiation if this ispossible, as an outcome agreed to by both parties occurringat an earlier point in time is beneficial to the parties to thecomplaint and assists in maintaining a continuing businessrelationship between the parties. If a Case Manager isunable to negotiate a resolution to a complaint, then theCase Manager may give an opinion on the merits orsuggest referral to the Panel or Adjudicator. The time taken to conciliate complaints is recorded under the separate categories.

Member First Response Times 2001

When a written complaint is received by the Service, the first action taken is to request the Member’s response.Rule 21 requires the Member to respond within 21 days. In 2001, only 46% of all responses were received within the 21 days required by the rules. This indicates that there is a need to remind Members of their obligations in relationto the Rules and the Service will be aiming to improve theperformance of Members in relation to this rule in the year2002. Once the Member’s response is received the Serviceinvestigates and negotiates in relation to the complaint.

Complaints Service Investigation/Negotiation Time

Although there has been improvement during 2001, the time taken for the Service to receive initial responses and to negotiate and investigate complaints is greatlyaffected by the failure of Members to respond within thetimeframes provided by the Rules and also difficulties withComplainants responding promptly. It is understandable

that sometimes response times can be affected by the needto wait for medical reports, however, this does not accountfor the majority of complaints where the time forinvestigation and negotiation could be reduced by promptresponses by the parties.

Arbitration by Panel and Adjudicator

If a complaint is not resolved during the investigation andnegotiation process then it will be referred to the Service’sChief Executive who will either set it down for a conciliationconference, or to be arbitrated by the Panel or Adjudicator.Prior to arbitration the parties will be required to exchangesubmissions. The Liaison and Technical Support Manager,Stephen Bray, will assist Complainants with their submissionif this assistance is required. Mr Bray has been with theService since 1994, and previously worked in the insuranceindustry for 28 years in a variety of roles with insurancecompanies and insurance brokers.

If a dispute is complex, or more than $10,000 is in dispute,the dispute will be determined by the Panel. Non-complexcases where $10,000 or less is in dispute will be referred to the Adjudicator who will determine the case based uponthe materials provided by the parties. A separate reportfrom the Chair of the Panel is included in this review.

The cases referred to the Panel are generally complex,involving extensive correspondence and documentation.These cases often include significant legal issues andquestions of good industry practice.

The Panel will usually determine disputes based upon thepapers supplied by the parties, although particularly inrelation to disputes where there is an assessment of theComplainant’s credibility required where fraud has beenalleged or cases involving medical issues, the Panel will hold an oral hearing.

The Panel Chair is also consulted by the Service whenjurisdictional issues arise, and in accordance with the Rulesthe ultimate decision in relation to jurisdictional issues restswith the Panel Chair.


Complaints Handling

Status of Complaints

There were 291 active complaints at the commencement of2001. During the year 588 new complaints were receivedand 71 complaints reopened, and 274 complaints wereactive at the end of 2001. There was a drop of 30 in newcomplaints received from 618 in 2000 to 588 in 2001.

Insurance 2000 2001






Complaints Service Investigation/Negotiation

There has been a definite improvement in the amount of timetaken by case managers to deal with the investigation andnegotiation process with 67% being dealt with in less than120 days, compared with only 40% for 2000.

Insurance 2000 2001Investigation No. No. Time Complaints % Complaints %

1 to 40 Days 63 6 47 5

41 to 60 Days 106 10 181 19

61 to 80 Days 42 4 97 10

81 to 100 Days 127 12 251 26

101 to 121 Days 85 8 63 7

121 Days & Over 634 60 311 33

Total 1,057 100 950 100

This is the period, in calendar days, between the date acomplaint is first received and the date the investigation isfinalised on 31 December 2001, whichever is the earlier.

Nature of Complaints

As has previously been the case denial of claim is the topcategory of complaint at 38%, followed by Service at 35%.

Insurance 2000 2001Nature of Complaints No. % No. %

Service 189 31 204 35

Denial of Claim 216 35 223 38

Policy Values/Charges 78 13 43 7

Non Disclosure 15 2 13 2


Terms of Conditions 51 8 64 11

Total 618 100 588 100

Distribution of Complaints 2001

Insurance 2001Complaints by State No. %

Australian Capital Territory 4 1

New South Wales 186 32

Northern Territory 6 1

Queensland 110 19

South Australia 42 7

Tasmania 19 3

Victoria 157 27

Western Australia 64 10

Total 588 100


Insurance

Contract Type Underlying Complaints 2001

The most complained about insurance products are IncomeProtection at 35%, Total and Permanent Disability at 19%,and single premium investment products at 16%.

Insurance 2001Complaints by Contract Type No. %

Whole of Life 36 6

Endowment 41 7

Investment Annual Premium 93 16

Investment Single Premium 18 3

Term 67 11

Income Protection 204 35

Total & Permanent Disability 110 19

Trauma 15 3

Immediate Annuity 0 0

Deferred Annuity 3 0

Allocated Pension 1 0

Total 588 100

Panel Determination Time 2001

Panel determination time improved during 2001, with 67%being determined in less than 6 months as compared with47% during 2000.

Insurance 2000 2001Panel Determination No. No. Time Complaints % Complaints %

Up to 4 Months 28 16 47 26

4 to 6 Months 55 31 76 41

6 to 10 Months 9 22 52 28

Over 10 Months 56 31 9 5

Total 178 100 184 100


Insurance

Nature of Complaint by Policy Type 2001

Insurance 2001 Denial Values/ Mis-rep- Terms & Non-Complaint by Policy Type of Claim Charges resentation Conditions Service Disclosure Total

Whole of Life 0 21 11 1 3 0 36

Endowment 0 16 15 1 1 8 41

Investment Annual Premium 0 2 10 31 46 4 93

Investment Single Premium 0 1 3 3 10 1 18

Term 7 0 0 0 60 0 67

Income Protection 163 0 2 0 39 0 204

Total & Permanent Disability 48 0 0 27 35 0 110

Trauma 5 0 0 0 10 0 15

Immediate Annuity 0 0 0 0 0 0 0

Deferred Annuity 0 2 0 1 0 0 3

Allocated Pension 0 1 0 0 0 0 1

Total 223 43 41 64 204 13 588

Complaint Outcomes

Complaint outcomes in life insurance were 38/62 in favourof Members for complaints finalised by Case Managers andthe Panel. For cases finalised by the Adjudicator the resultwas 56/44 in favour of the Complainants. However as thenumber of cases resolved by adjudication was five, theresults could not be considered statistically significant.

Insurance 2000 2001Complaint Outcomes No. % No. %

Finalised by Case Manager

In favour of Complainant 235 41 189 38

In favour of Member 345 59 308 62

Medical Conciliations



Adjudicator



Finalised by Panel



Total Finalised



Complaints Cancelled

Withdrawn by Complainant 55 28

Outside Terms of Reference

Underwriting Decision 2 2

Investment Performance 3 10

Member not involved 2 4

Dispute prior to 1/10/90 1 0

Subject to legal proceedings 1 4

Consent denied by fund trustees 2 0

Amount over $250,000 1 4

Total Finalised 766 676


Insurance

1. Case StudyLife Insurance/Denial of Claim/Panel

A deferred annuity was commenced in 1994. In 1998,1999 and 2000 the Complainant withdrew the balanceof the annuity and rolled it over into a fund operated byanother Member. Brokerage charges were deducted oneach occasion. In 2001, the Complainant asked for theexit fees levied in 2000 to be investigated as he felt thatthey should not have been charged because when theComplainant bought the policy the agent who sold it tohim informed him that no exit fees would be chargedafter the end of three years. The Member informed himthat the deduction was made in accordance with theterms of the contract and refused a refund.

In order to enter into the contract the Complainant had to complete an application form which contained theMember’s Customer Information Brochure (CIB) in respectof the product. Below the box in which the applicant hadto write his signature there was a note which read, “Thisapplication can only be used if attached to the Brochure.Before signing this application you should read theBrochure”. The Complainant says that he was not giventhe CIB or told of its contents and that the only part of itwhich he saw was the application form. The agent hassince died and left no notes of the transaction.

The CIB contained clear provisions for brokerage fees to be charged where units were sold as a result ofswitching between investment classes, withdrawal ortermination. It was clearly stated that the sale value wasless than the purchase value by 1.5%.

It was significant that the Complainant had madewithdrawals in 1998 and 1999 and that deductions were made in respect of each withdrawal withoutcomment from him. If the Complainant had been told thatno exit fees would be charged it is most unlikely that hewould have waited until 2001, ten months after the finalwithdrawal to complain. The Member had also providedcopies of contract summaries annually showing details oftransactions during the year, yet no questions were raisedby the Complainant. The complaint was dismissed.

Referral Source of Complaints 2001

Insurance 2001Complaints by Referral Source No. %

Agent /Broker 26 4

ASIC /ACCC 15 3

Friends (includes relatives) 7 1

Member Company 306 52

Media (Newspaper, Radio etc) 6 1

Ombudsman (Commonwealth/State) 24 4

Professional Bodies 103 18

Superannuation Complaints Tribunal 3 1

Consumer Affairs 26 4

Community Groups 15 3

IEC / ICA 24 4

Members of Parliament 2 0

Telephone Directories 31 5

Total 588 100


InsuranceTypes of Outcome achieved for Complaints Resolved in 2001 in favour of the Complainant

Insurance Outcomes Case Manager Medical Adjudicator Panel Total %

Contract cancelled from inception 4 0 0 0 4 2

Contract alteration 8 0 3 10 21 9

Charges waived/reduced 20 0 1 4 25 11

Claim paid 61 1 1 23 86 37

Resolved by Agreement 96 0 0 0 96 41

Total 189 1 5 37 232 100

2. Case StudyLife Insurance/Denial of Claim/Case Manager

The Complainant alleged that at the time of effecting anincome protection policy back in April 1998 he gave fulldisclosure on all matters to the agent who interpreted theinformation and completed the proposal for him. He alsoprovided the name of the current medical practitionerwho he believed would be contacted to provide amedical report based on his current state of health.

The proposal was accepted and the policy issued.

In March 2000 he became ill and an initial claim formwas completed in May 2000.

It was not until September 2000 that the Member wroteto the Complainant explaining that due to the non-disclosure of important medical history the claim wouldbe denied and the policy avoided pursuant to Section 29(3) of the Insurance Contracts Act 1984.

The Service supported the Member’s decision as themedical evidence indicated a past medical history which would have prevented acceptance if disclosed at the time and the agent denied any knowledge of past medical history.

Whilst the proposal did include the name of his currentmedical practitioner there was no reason for the Memberto make enquiries as the Complainant did not discloseany history of past illness.


There were 186 new financial planning complaints receivedin 2001, compared with 83 for the year 2000. This possibly indicates a growing consumer awareness of the Service.

Financial Planning 2000 2001







There has been an improvement in the time taken by CaseManagers to deal with complaints with 81% dealt with inless than 120 days compared with 76% in 2000.

Financial Planning 2000 2001Investigation No. No. Time Complaints % Complaints %

1 to 40 Days 1 1 24 10

41 to 60 Days 4 5 47 19

61 to 80 Days 12 14 23 9

81 to 100 Days 12 14 71 29

101 to 121 Days 34 42 34 14

121 Days and Over 20 24 46 19

Total 83 100 245 100

This is the period, in calendar days, between the date acomplaint is first received and the date the investigation isfinalised, or 31 December 2001, whichever is the earlier.


Financial Planning

3. Case StudyLife Insurance/Denial of Claim/Panel

The complaint concerns an insurance policy providing fora lump sum cash benefit to be paid in the event of theperson suffering any of several specified illnesses, onesuch illness being “heart attack”.

In December 1998, eight months after purchase of thepolicy, the Complainant suffered chest pain. Investigationby a cardiologist some months later indicated that shehad had a heart attack at some time in the past and thatit might have been suffered when she experienced thechest pain in December 1998.

She made a claim on the policy, but the Member deniedthe claim on the basis that the requirements of the policyrelating to a diagnosis of heart attack, which required an enzyme test, had not been met.

The Panel found that the Complainant had received abooklet, a letter and a leaflet. The booklet contained anapplication form which was filled out by the consumerand constituted an offer. Its acceptance by the insurerbought the contract into existence.

The application, booklet and other documents did notcontain the very technical manner of proof which wasrequired by the insurer, and would not be contemplatedby a reasonable person. It was a substantial departurefrom the terms on which the Complainant made her offerto the Member to enter into the insurance contract andcannot bind her.

The medical evidence shows that on the balance ofprobabilities the Complainant suffered a heart attackwhile the policy was in existence. The Panel upheld the complaint.


The most common complaint against financial planners isinappropriate advice at 35%, followed by misrepresentationand standard of service, both at 22%.

FInancial Planning 2000 2001Nature of Complaints No. % No. %

Failure to meet Consumer Protection Standard 0 0 0 0





Non Disclosure ConditionsWarnings 1 1 0 0

Non Disclosure Fees/Charges 14 17 7 4

Non DisclosureTax/Social Security 3 4 6 3

Values/Charges 2 2 11 6

Standard of Member Service 17 21 40 22

Share Transaction- Misunderstanding 1 1 10 5

Technical Problem 2 2 0 0

Total 83 100 186 100


Financial Planning 2001Complaints by State No. %




Queensland 33 18


Tasmania 6 3

Victoria 47 25


Total 186 100


The most complained about products are investments of onelump sum at 68%, followed by investments with an annualcontribution at 19% and personal super at 9%.

Financial Planning 2001Complaints by Investment Type No. %



Investment Single Lump Sum 126 68

Master Trusts 3 2

Managed Investments – Cash 0 0

Managed Investments – Shares 0 0

Shares Derivatives Warrants 0 0

Superannuation Personal 17 9

Unit Trusts Property 5 2

Total 186 100


Financial Planning

Nature of Complaint by Contract Type 2001

FInancial Planning Investment Investment Master Superannuation Unit TrustsComplaints by Contract Type Annual Premium Single Lump Sum Trusts Personal Property Total

Failure to meet Consumer Protection Standard 0 0 0 0 0 0

Denial of Claim 0 0 0 0 0 0

Inappropriate Advice 32 27 0 6 0 65

Misrepresentation 3 39 0 0 0 42

Non Disclosure 0 0 0 0 5 5

Non Disclosure Conditions Warnings 0 0 0 0 0 0

Non Disclosure Fees/Charges 0 7 0 0 0 7

Non DisclosureTax/Social Security 0 6 0 0 0 6

Values/Charges 0 8 3 0 0 11

Standard of Company Service 0 29 0 11 0 40

Share Transactions- Misunderstanding 0 10 0 0 0 10

Technical Problem 0 0 0 0 0 0

Total 35 126 3 17 5 186


Financial Planning


Eighty-three percent of financial planning complaints weredetermined within six months of referral to the Panel.

Financial Planning 2000 2001Panel determination No. No. time Complaints % Complaints %

Up to 4 Months 1 10 12 40

4 to 6 Months 9 90 13 43

6 to 10 Months 0 0 4 13


Total 10 100 30 100

Complaint Outcomes

Outcomes at Case Manager level were 42/58% in favourof the Members. Outcomes at the Panel were 50/50,however the Panel only dealt with 16 cases. The Adjudicatordecided only two financial planning cases which were bothfound in favour of the Member.

Financial Planning 2000 2001Complaint Outcomes No. % No. %




Adjudicator



Finalised by Panel



Total Finalised















Financial Planning

4. Case StudyFinancial Planning/Inappropriate Advice/Panel

The Complainant had preserved benefits in twosuperannuation funds. The authorised representative of the Member prepared a financial plan for him, which heaccepted. As a result the preserved benefits in both fundswere withdrawn and put into one of the Member’ssuperannuation funds; a growth fund. The capital value of thefund reduced and the Complainant expressed his concern.The financial plan had envisaged substantial further paymentsinto the fund from maturing term deposits. The Complainantadvised that these would not be proceeded with. Theauthorised representative suggested that the money in thegrowth fund be transferred to a less volatile fund, but this was not taken up.

The complaint had four parts:

● The poor service of the Member being theinappropriateness of the advice to invest in the growthfund;

● The failure to correctly assess tolerance to financial risk;

● The failure to accept the mistake and place the fund in aninvestment exposed to less risk; and

● The ongoing failure to do anything constructive about theComplainant not being happy with the recommendations.

In the financial plan the authorised representative clearly setout what he understood to be the Complainant’s risk profile.Warnings of the risk of market fluctuations and a descriptionof the types of funds giving indications of their relative riskfactors were also shown.

The Complainant stated that he trusted the authorisedrepresentative and his oral discussion and did not study thefinancial plan. However, it was available to him for nearlyone month before he decided to accept it and he had signedAppendix A indicating his satisfaction with the asset and fundallocation profile contained in the plan.

It was found that the authorised representative actedcompetently and professionally in the giving of the advice inthe financial plan and that the Complainant’s tolerance tofinancial risk had been assessed. The complaint was not upheld.

Types of Outcome achieved for Complaints Resolved in 2001 in favour of the Complainant

Financial Planning Outcomes Case Manager Medical Adjudicator Panel Total %




Claim paid 0 0 0 0 0 0


Total 38 0 0 8 46 100


Financial Planning

5. Case StudyFinancial Planning/Inappropriate Advice/Case Manager

It was alleged that in late 1996 a licensed dealer insecurities and a registered life broker recommended theComplainant invest in an 11% convertible preference shareissue that was to take place. An application form wasreturned together with $9,600.

It was further alleged that:-

1. No Prospectus was attached or provided.

2. There was a lack of information provided to the client.

3. That the licensed dealer did not advise that his companywas holding a significant block of the same shares.

4. That the information held, if disclosed, would havematerially affected the share price.

5. There did not appear to be any active analysis of theMember either prior to recommending the purchase orsubsequently following the issue of shares to a significantnumber of clients.

The Member defended its position by saying that the aboveinvestment was only one in a portfolio which overallperformed well. The Member offered to waive fees of$2,107 in order to settle the matter.

The Complainant continued to make the allegations mentionedabove and was not satisfied with the offer made.

As the matter remained in dispute the Member was informedthat the complaint would be referred for adjudication if noalternative resolution could be obtained.

The Member finally was prepared to pay on a “withoutprejudice basis” the full $9,600 in full settlement and aDeed of Release was completed.


Financial Planning 2001Complaints by Referral Source No. %

Agent/Broker 2 1

ASIC/ACCC 0 0









IEC/ICA 0 0



Total 186 100


There were 134 new stockbroking complaints received in2001, compared with 88 in 2000. This possibly indicates a growing consumer awareness of the Service.

Stockbroking 2000 2001







Case Managers dealt with 77% of complaints in less than120 days as compared with 56% in 2000.

Stockbroking 2000 2001Investigation No. No. Time Complaints % Complaints %

1 to 40 Days 4 5 5 3

41 to 60 Days 8 9 17 8

61 to 80 Days 5 6 29 14

81 to 100 Days 32 36 84 42

101 to 121 Days 23 26 61 30

121 Days and Over 16 18 6 3

Total 88 100 202 100

This is the period, in calendar days, between the date acomplaint is first received and the date the investigation isfinalised, or 31 December 2001, whichever is the earlier.


The top complaint in relation to stockbroking is sharetransaction misunderstandings at 55% followed by non-disclosure issues totalling 27%.

Stockbroking 2000 2001Nature of Complaints No. % No. %






Non Disclosure Conditions Warnings 1 1 0 0

Non DisclosureFees/Charges 15 17 17 13



Share TransactionMisunderstanding 0 0 74 55

Total 88 100 134 100


Stockbroking 2001Complaints by State No. %




Queensland 26 19


Tasmania 4 3

Victoria 36 27


Total 134 100


Stockbroking


The most common products complained about were shares,derivatives or warrants at 69% and investment of lump sumsat 31%.

Stockbroking 2001Complaints by Investment Type No. %




Master Trusts 0 0

Managed Investments Cash 0 0

Managed Investments Shares 0 0

Share Derivatives Warrants 92 69



Total 134 100

Nature of Complaints by Contract Type 2001

Stockbroking 2001 Investment Shares,Complaints by Single DerivativesContract Type Lump Sum Warrants Total

Failure to meet Consumer Protection Standard 1 0 1

Denial of Claim 25 49 74

Inappropriate Advice 0 2 2

Misrepresentation 6 5 11

Non Disclosure 1 0 1

Non Disclosure Conditions/Warnings 0 0 0

Non DisclosureFees/Charges 4 13 17

Non DisclosureTax/Social Security 3 16 19

Values/Charges 2 7 9

Total 42 92 134


In 2001 the Panel determined 93% of stockbrokingcomplaints within 6 months of referral to the Panel.

Stockbroking 2000 2001Panel No. No. Determination Time Complaints % Complaints %


4 to 6 Months 8 80 12 40

6 to 10 Months 1 10 2 7


Total 10 100 30 100


Stockbroking

6. Case StudyStockbroking/Service/Case Manager

The Member incorrectly sold the Complainants’ shares anddeposited the proceeds of $7,681.57 into its bank account.

They were not informed for two months at which time theywere no longer in a position to repay as a lump sum andtried to negotiate. It was alleged that the company’sresponse was an aggressive “pay or else” attitude.

The company acknowledged a delay of five weeks innotifying the clients of the problem. On the 6 June 2000the company contacted the Complainant who said hewould check his records and if necessary he would makepayment by 9 June 2000. The shares were fully reinstatedat no cost to the client on the understanding that themoney would be returned.

Negotiations continued to stall and the company againsold the shares on the 17 July 2000.

The FICS investigation supported the Member in that itcontinued to offer full reinstatement of the shares uponreturn of the incorrect monies paid.

The Complainant remained unhappy, and itemised coststotalling $78.04 associated with the dispute.

The Member agreed to pay the additional costs and thecomplaint was finalised.

Complaint Outcomes

Of the stockbroking complaints finalised by Case Managers 63% were finalised in favour of the Member. The Panel found 56% in favour of the Member, and the Adjudicator 62%.

Stockbroking 2000 2001Complaint Outcomes No. % No. %




Adjudicator



Finalised by Panel



Total Finalised















Stockbroking

7. Case StudyStockbroking/Inappropriate Advice/Case Manager

The Complainant, who owns a metropolitan plumbingbusiness, complained to FICS that as a result of pooradvice he had received from a stockbroking advisor hehas lost $25,000. The Member concerned denied theallegation and supported the advisor.

The Complainant stated he had been given advice tosell and purchase certain stocks and these had gonedown in price and as a result he had lost money. He stated that he relied upon the advice from hisstockbroker when making transaction decisions. He presented himself as being a relativelyinexperienced trader.

The Member denied it had given advice and stated the transactions were done on a non-advice basis. It provided documents which supported its claims that the dealing was non-advisory. It also presentedevidence which indicated the Complainant was not as inexperienced as he had suggested.

As part of the FICS investigation, informationconcerning the transaction history of the Complainantwas obtained, to try and establish how muchexperience he had in trading stocks.

His transaction history indicated that in a 19 monthperiod he had undertaken over 190 purchases andsales. This did not include any ‘E-Trade’ transactions.This clearly showed that the Complainant was anexperienced trader and, combined with the otherevidence produced, supported the Member’s assertionsthat it had acted in a proper manner.

Types of Outcome achieved for Complaints Resolved in 2001 in favour of the Complainant

Stockbroking Outcomes Case Manager Medical Adjudicator Panel Total %






Total 22 0 5 7 34 100


Stockbroking


Stockbroking 2001Complaints by Referral Source No. %

Agent/Broker 10 8

ASIC/ACCC 2 1









IEC/ICA 0 0



Total 134 100


Stockbroking

8. Case StudyStockbroking – Inappropriate Advice/Adjudicator

The Complainant wished to engage in short term sharetrading and informed the Member’s advisor that he wasusing borrowed money and that generally he wanted toadhere to a 5% stop loss rate. The advisor told theComplainant that he would monitor his holdings and madea note to check when the price of any stock was below5% of the purchase price.

The Complainant began trading and at no time did hehold shares in more than four companies. All of thepurchases and all but one of the sales were apparentlymade on the advice of the advisor and most of the shareswere sold at a profit, some within a few days and otherswithin three months.

Using money from a previous sale the Complainant bought16,000 ordinary fully paid shares in One.Tel, these weresold about three weeks later for a loss of $960. He alsobought shares in News Corporation and MobileInnovations which he held on to.

The complaint is that the advisor failed to inform him whenthe price of One.Tel, News Corporation and MobileInnovations fell 5% below the purchase price and wasincompetent in advising him to hold them after their pricehad fallen.

The Member states that the advisor did inform theComplainant when the prices of the latter two shares had fallen by 5% and that he attempted to do so inrespect of One.Tel but was unable to contact him.

The advisor also stated that the Complainant wanted tomake a profit quickly, even to the extent of wishing totrade in options in circumstances where the Member wasnot willing to transact the business. The advisor acceptsthat he advised the Complainant to hold on to the NewsCorporation and Mobile Innovations shares because heexpected the prices to recover, this was on the basis ofanalysts’ recommendations and company statements.

The Adjudicator found that in respect of the alleged failureof the advisor to inform him when One.Tel shares hadfallen to 5% below the purchase price that there was nocertainty or even a likelihood that the Complainant wouldhave sold those shares immediately if he had beeninformed. He did not sell the News Corporation andMobile Innovations shares to cut his losses when theirprice fell. The advisor had no reason to believe that theOne.Tel shares would not be a good investmentconsidering the Packer and Murdoch families hadcommitted considerable funds to the company to ensurethat it remained afloat.

The Adjudicator found that the advisor was not negligentor incompetent in advising the Complainant and thecomplaint was not upheld.


There were 80 new managed investment complaintsreceived during 2001, compared with 23 for 2000. This possibly indicates increased consumer awareness of the Service.

Managed Investments 2000 2001







In 2001 the Case Managers took less that 120 days to dealwith 92% of the complaints, compared with 83% for 2000.

Managed Investments 2000 2001Investigation No. No. Time Complaints % Complaints %

1 to 40 Days 1 4 8 8

41 to 60 Days 2 9 11 10

61 to 80 Days 3 13 10 10

81 to 100 Days 7 30 63 61

101 to 121 Days 6 27 4 3

121 Days and Over 4 17 8 8

Total 23 100 104 100

This is the period, in calendar days, between the date acomplaint is first received and the date the investigation isfinalised, or 31 December 2001 whichever is the earlier.


The top causes for complaints in relation to managedinvestments are misrepresentation at 30% (eg misrepresentation as to performance), inappropriateadvice at 29%, service at 20% and non-disclosure of feesand charges at 15%.

Managed Investments 2000 2001Nature of Complaints No. % No. %





Non Disclosure Conditions/Warnings 1 4 0 0

Non DisclosureFees/Charges 4 17 12 15



Standard of Member Service 9 40 16 20

Total 23 100 80 100


Managed Investments 2001Complaints by State No. %




Queensland 15 19

South Australia 6 8

Tasmania 4 5

Victoria 21 26


Total 80 100


Managed Investments

Contract Type Underlying Complaint 2001

The most common types of managed investment complainedabout were single lump sum investments at 42%, cash at26% and personal super at 16%.

Managed Investments 2001Complaints by Investment Type No. %




Master Trusts 4 5

Managed Investments Cash 21 26

Managed Investments Shares 0 0

Shares Derivatives Warrants 0 0



Total 80 100


Managed Investments

Nature of Complaint by Contract Type 2001

Managed Investments Investment Master Managed Superannuation Unit TrustsComplaints by Contract Type Single Premium Trusts Investment Cash Personal Property Total

Inappropriate Advice 19 3 1 0 0 23

Misrepresentation 0 1 11 3 9 24

Non Disclosure 0 0 0 0 0 0

Non Disclosure Conditions/Warnings 0 0 0 0 0 0

Non Disclosure Fees/Charges 0 0 2 10 0 12

Non DisclosureTax/Social Security 0 0 0 0 0 0

Values/Charges 1 0 4 0 0 5

Standard of Company Service 13 0 3 0 0 16

Total 33 4 21 13 9 80


Managed Investments 2000 2001Panel No. No. Determination Time Complaints % Complaints %


4 to 6 Months 0 0 4 44

6 to 10 Months 0 0 3 34


Total 1 100 9 100

This is the period, in months, between the date a complaintis forwarded to the Panel for Determination and the date of Determination, or 31 December 2001, whichever is the earlier.

Complaints Outcomes

Case Managers finalised 54% of complaints in favour of Members. The Adjudicator and Panel did not finalise a statistically significant number of managed investment complaints.

Managed Investments 2000 2001Complaint Outcomes No. % No. %




Adjudicator



Finalised by Panel



Total Finalised















Managed Investments

Types of Outcomes Achieved for Complaints Resolved in 2001 in favour of the Complainant

There were 118 complaints finalised by the Panel during the year 2000. Of these, 38% were finalised in favour of theComplainant and 62% in favour of the Member.

Managed Investments Outcomes Case Manager Medical Adjudicator Panel Total %






Total 18 0 2 0 20 100


Managed Investments


Managed Investments 2001Complaints by Referral Source No. %

Agent/Broker 0 0

ASIC/ACCC 0 0









IEC/ICA 0 0



Total 80 100


Managed Investments

9. Case StudyFunds Management/Unit price misrepresentation/Adjudicator

The Complainants withdrew funds from six of theMember’s investment funds, after telephoning a customerservice representative of the Member to obtain exit prices.

When the transaction was complete the Complainantsfound that they received a lower exit price for all fundsthan that stated by the customer service representative.The Complainants asked to be paid the difference, theMember declined to do so and the Complainants lodgeda complaint with FICS.

The Member argued that all of its customer servicerepresentatives are trained to advise clients in accordancewith the prospectus which provides, “if we receive yourfully completed withdrawal request in a [Member’s] officeby 5pm (Sydney time) on a NSW business day, we willprocess your withdrawal using the exit price calculated,based on market valuation, at the close of business that day”.

The Member does not know which customer servicerepresentative answered the Complainants’ call, and it was therefore not possible to ascertain whether the standard advice was given.

The Member also argued that it would be unfair to allother investors in the fund if it paid a different price toonly one investor.

The Complainants argued that it was not reasonable forthe Member to rely on one paragraph in a very largeprospectus, and that they were entitled to rely on theinformation given by the representative regarding the exit price.

The Adjudicator considered it reasonable for even a small investor to realise that money can be paid out on a withdrawal only on the basis of sale of the underlyingshares, and that the price at which the shares are soldwill vary throughout any day. He also considered itreasonable to expect an investor to address his mind tothe question of how the exit price is to be calculated inthose circumstances. The answer to that question is in the prospectus and the part of the prospectus dealing with withdrawals is concise and clearly expressed. The Adjudicator did not uphold the complaint.

The Service participates in seminars, industry forums and Alternative Dispute Resolution (ADR) Group Forums. The Service now publishes all determinations of the Paneland the Adjudicator on the FICS website. The website alsocontains FICS contact details, complaint forms, privacyinformation, lists of Members, the FICS Annual Review,bulletins, speeches and other information.

Bulletins issued by the Service during the year dealt withchanges to the Rules, FICS complaints processes, privacy,website improvements, the review of FICS, liaison meetings,appointments to the Service, case studies and the results ofcommunications research.

Forums, Conferences and Seminars

Industry

● FPA Luncheon Brisbane 2nd February 2001

● FPA Principal Members Conference Canberra 6th July 2001

● IFSA Conference Brisbane 31st July 2001 (two differentpresentations)

Consumer

● Financial Counsellors NSW Annual Conference BathurstApril 2001

● ADR Forum Hobart 16th May 2001

● ADR Forum Sydney 14th June 2001

● ADR Forum Coffs Harbour 24th July 2001

● ADR Forum Toowoomba 25th July 2001

● ADR Forum Darwin 14th August 2001

● ADR Forum Perth 26th October 2001

● ADR Forum Bunbury 25th October 2001

● Financial Information Service Officers Centrelink Brisbane6th December 2001

● Meetings with consumer groups Melbourne May 2001and Perth October 2001

Other

● Deakin University financial planning students 8th May 2001

● Department of Business and Consumer Affairs NT 15th August 2001

● Youth Access project launched Canberra 4th April 2001

● ASIC Stakeholder Forum Sydney 14th November 2001

Media Articles Featuring FICS

● The Age ‘money’ section 14th May 2001

● Investor’s Advisor 4th June 2001

● Sydney Morning Herald 11th August 2001

● Sun Herald 21st October 2001

● Investor’s Advisor 12th November 2001

● Money Management 6th December 2001

● Money Management 17th January 2001

● Sydney Morning Herald 6th February 2002

Communications Research

The results of communications research conducted during2000 were available in early 2001. The research evaluatedthe level of awareness of FICS among the likely points ofreferral of consumers to the Service. The research focussedon Members as well as organisations consumers would turnto with a problem, and which ideally should be referringconsumers to FICS.

The research indicated that there was considerable room for improvement in relation to both Members and externalagencies. FICS has highlighted the research to Members, and has worked with some of the Members with a view to improvement. Further implementation of the researchrecommendations is planned for 2002.

Youth Access Project

The Youth Access project was officially launched on 4th April2001 by the then Minister for Financial Services andRegulation, The Honourable Joe Hockey.

The project is a combined project with the Australian BankingIndustry Ombudsman, the Energy Ombudsman in variousstates, Insurance Enquiries and Complaints Limited and theTelecommunications Industry Ombudsman. The projectinvolves distribution of cards to young people containing oneaccess number for all schemes. Appropriate telecommun-ications infrastructure was put in place, and a website withlinks to the schemes created. The cards have been distributedwidely to young people through apprenticeship schemes,TAFE colleges and other training and youth organizations.During the year the project received 385 telephone calls and1765 hits to the website. The contact details for the projectare 1800 001 601 and www.dispute.com.au.


Education

Membership

The Constitution of FICS provides for six differentmembership categories.

● Category A – life insurance

● Category B – reinsurers

● Category C – managed investments

● Category D – superannuation

● Category E – brokers, financial and security advisors

● Category F – non-voting (must be under a certain size to be eligible for this category)

Full details of the membership categories can be found in the FICS Constitution, a copy of which can be obtainedfrom the Service, or viewed on the FICS website.

A new database for Members was installed during 2001.The database instantly updates an intranet facility which can be accessed by all staff, and also updates membershipinformation on the website daily. All Members are listed onthe FICS website, and where Members have informed FICSof their website details, the Member’s website can beaccessed by clicking on the Member’s name. The newdatabase will also be linked with the accounting and casemanagement systems in the near future.

Senior Appointment

The Service created a new position of Legal ServicesManager and appointed Wendy Ribbands to this position.


Administration

Cancelled MembershipsCategory 31/12/00 New Members 2001 (at Member’s request) 31/12/01

Category A 32 0 0 32

Category B 5 0 0 5

Category C 209 17 7 219

Category D Nil 0 0 0

Category E 167 5 1 171

Category F 1,113 231 26 1,318

Total 1,526 253 34 1,745

Significant issues for the Service during the next 12 monthsinclude:

1. Review of the Service

The Service is currently being reviewed by CommunitySolutions jointly with La Trobe University. The issuespaper will be released by 22nd July 2002, and the finalreport by 29th November 2002. A major focus for theService will be dealing with the recommendations of the Review.

2. Harmonisation

The single telephone number (1300 78 08 08)accessing Financial Industry Complaints Service,Australian Banking Industry Ombudsman and InsuranceEnquiries and Complaints was launched on 21 June2002. Other opportunities for harmonisation will be pursued.

3. New Case Management System

The Service is implementing a new case managementsystem based on the system used by the AustralianBanking Industry Ombudsman. Necessary training andadjustments to the system will occur over the next twelvemonths, and will lead to improved statistical reporting by the Service.

4. Complaint Handling Times

The Service has made improvements in the time taken todeal with complaints, however it has been disappointingthat Member response times (compliance with Rule 7)have not improved. The Service will be focussing on this issue.

5. New Panel Chair

A new Panel Chair will be appointed to the FinancialIndustry Complaints Service Panel, and changes to Panelcomplaint handling procedures will be likely.

6. Systemic Issues

The Service will be reviewing the approach taken to systemic issues to ensure that the approach isappropriate to stakeholder needs.


Issues for the Future

Member Companies

FICS Member Companies can be found on the website: www.fics.asn.au

FICS Annual Review 2001

Organisation Structure

Financial Industry Complaints Service Limited

Board of DirectorsIndependent Chair4 Industry Members

4 Consumer Members

ExecutiveAssistant

CaseManagers (4)

SecretaryEnquiries

Officers (2)Administration/Receptionist

Personal Assistant(part-time)

MembershipCo-ordinator

Liaison and TechnicalSupport Manager

Administration Manager/Senior Case Manager

Legal Services Manager

Chief Executive

Arbitration Panels

Independent ChairIndustry Representative

Consumer Representative

Adjudicator

ABN 64 068 901 904

PO Box 579 Collins Street WestMelbourne Victoria 8007

Telephone03 9629 7050

T O L L F R E E1 3 0 0 7 8 0 8 0 8

Facsimile03 9621 2291

[email protected]

Websitewww.fics.asn.au

FINANCIAL INDUSTRYCOMPLAINTS SERVICE LIMITED

Documents

ANNUAL REVIEW 2001 - Financial Ombudsman Serviceof the Federal Minister responsible for Consumer Affairs. In 1975 he was appointed Managing Director of Berger Paints Australia, a position