Twenty-two months without a review and a complaint that arrives by email
Kelvin, 47, invested $150,000 in a balanced fund three years ago on the recommendation of adviser Lisa at a licensed FAP. His service agreement provides annual reviews and a 0.90% a year ongoing fee. Reviews happened by phone in years one and two. Lisa then took nine months of parental leave; no one was assigned her clients, the firm migrated to a new CRM, and Kelvin had no contact for 22 months. In that period the fund's product disclosure statement changed to a materially higher allocation to alternative assets, and the fund returned 3.1% against 7.4% for the peer average. Kelvin emails: 'I have paid for a service I did not receive, nobody told me the fund had changed, and I want the shortfall back. If I do not hear in a week I am going to the dispute scheme.' Lisa replies three days later offering to catch up over coffee.
1. What has the FAP got wrong here, both operationally and against its ongoing service obligations?
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Operational failures: no cover arranged for Lisa's client book, no handover, and a CRM migration that lost review triggers. Both are system failures, not bad luck. Reviews were promised in the service agreement and a fee was charged for the service.
Ongoing service obligations: the client was left without the review cycle he was paying for. The adviser's monitoring role does not stop when the market is quiet: the fund's PDS changed to a materially higher allocation to alternatives, which changes the risk profile of the holding and may affect suitability for a 47-year-old with a stated risk profile. Nobody checked whether the recommendation was still suitable after that change.
Fee for no service: 0.90% on $150,000 is about $1,350 a year. Charging for reviews that did not happen is the core of Kelvin's complaint and the easiest part to remedy.
Record keeping: the file should show each review, what was discussed, and any decision to change or retain the fund. A 22-month gap in the records is itself a breach of the expectation that advice and service be evidenced.
The response so far: offering coffee is not a complaints response. It reads as minimising a service failure and gives Kelvin no information about his rights.
2. Set out how the FAP should handle the complaint from this point, including communication, process and the client's escalation rights.
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1. Treat the email as a formal complaint immediately. Log it, date it, and assign someone other than Lisa to own it, given she is the subject of part of the complaint.
2. Acknowledge in writing promptly, within a few working days, confirming it is being handled as a complaint and naming the contact.
3. Investigate: reconstruct the review history from the file and CRM, confirm what was charged and when, establish what Kelvin was told about the PDS change, and check whether other clients of Lisa were affected by the same gap.
4. Respond substantively in writing within the timeframe in the FAP's complaints policy (commonly around 20 working days): findings, what the FAP accepts, what it does not, the remedy offered, and the reasons.
5. Tell Kelvin about the approved dispute resolution scheme the FAP belongs to, that he can refer the complaint there if he is not satisfied, and how. Do not discourage it and do not imply he must wait indefinitely. Note any time limits under the scheme's rules.
6. Fix the cause: assign cover for adviser absences, rebuild review triggers in the new CRM, audit the affected client list for missed reviews, and record the corrective action.
The coffee can happen, but only after a written response that addresses the complaint on its merits.
3. What outcome is reasonable, and how should the FAP separate the fee complaint from the investment performance complaint?
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The two complaints have different answers and should not be merged.
Fee for no service. This is straightforward. Kelvin paid for reviews he did not receive for roughly 22 months. A pro-rata refund of the ongoing fee for the period of non-service, about $2,475 on 0.90% of $150,000 over 22 months, is a defensible starting point, together with reinstating the review and a clear schedule going forward. Waiving or reducing the next fee is an alternative if the client prefers.
Investment underperformance. The fund returning 3.1% against a 7.4% peer average is not, by itself, compensable. Market outcomes are a risk the client carries, and the adviser does not guarantee performance. However, the analysis changes if the underperformance is connected to the PDS change to a materially higher alternatives allocation, and if that change meant the fund was no longer consistent with the advice originally given or Kelvin's risk profile. In that case the failure is one of monitoring and communication, not of market returns.
Practical remedy: refund the fee for the missed period, conduct a full review now that reassesses suitability against the current fund composition and Kelvin's circumstances, and document the outcome. If the review shows the fund is no longer suitable, recommend an alternative and consider whether the client should be compensated for any loss flowing from the delay, assessed on the facts rather than on the market gap alone.
Why this matters: paying the peer-average shortfall would treat market risk as the adviser's risk. Refusing any remedy would ignore a genuine service failure. The file must show the distinction was reasoned, not negotiated.