By Amanda Morrall
Investors who were steered into Ross Asset Management (RAM) via a financial advisor are being encouraged to come forward and lodge a complaint with their affiliated dispute resolution scheme.
In an interview with interest.co.nz, Financial Services Complaints Ltd (FSCL) CEO Susan Taylor restated the call for RAM investors who were directed into the failed fund (now under investigation by both the Financial Markets Authority and Serious Fraud Office) to take action, adding that others with unresolved complaints should do the same.
The exact number of investors who came into Ross Asset Management through a financial advisor is not known. Although receivers PwC are still combing through the books, RAM's 900 clients with a supposed NZ$450 in assets were shocked to find only NZ$11 million in actual funds by the time authorities stepped to explore identified irregularities. (See Gareth Vaughan's interview with FMA's Sean Hughes here for more.)
Taylor said most investors appeared to have invested through word of mouth, either a recommendation from a friend or a family member.
"Anecdotally we heard from statements coming from the (RAM) support group that a few investors might have invested on the advice of an advisor. If that's the case, I would strongly recommend they find out which scheme that advisor belongs to and look at making a complaint to that scheme. We encourage people to come forward. It's important that the bad eggs be weeded out."
FSCL was the nominated dispute resolution scheme for RAM although financial advisors themselves have a choice between four dispute resolution schemes to be compliant with new financial laws in New Zealand:.
'Cluster of complaints'
Taylor said in the weeks leading up to revelations that RAM was being investigated by the Serious Fraud Office, a "cluster of complaints" had come to the FSCL's attention.
Taylor said her team never had a chance to look into those complaints because the sheer volume of them led the FSCL to alert the Financial Markets Authority instead, which, it turns out had also been fielding complaints.
"When they heard we were receiving a large number of complaints they swung into action right away,'' she said.
Taylor said some investors had been trying for nine months unsuccessfully to gain access to their funds and were finding it increasingly difficult to reach RAM's chief executive authorised financial advisor David Ross. Taylor speculated that if investors had acted in the early stages, financial losses might have been reduced and other investors spared.
Contrary to public perception, Taylor said it was a relatively straight forward procedure making a complaint.
"It's free to the consumer, there is no filing fee, they don't need a lawyer. We try to make the process as friendly as possible for the consumer,'' said Taylor.
"We will tell them about our process and help them along the way. I don't think they need to worry that they'll be cross examined and such. The other thing to remember is the process is confidential. We don't name parties. So the person doesn't need to worry that the case will get splashed across the media."
In the first instance anyone with a complaint, be it an advisor, an insurer, or another financial service sector party, is required to lodge a complaint directly to the party in question. If they can't come to terms, then they can take the complaint to the dispute resolution scheme which will review the relevant files, talk to the parties involved and potentially refer it back for resolution. Failing a negotiated settlement, the dispute resolution scheme will adjudicate the case on merit, either dismissing it or potentially ordering compensation, which can include an award of up to NZ$200,000.
Decisions not binding on consumers
Taylor said the FSCL's decisions, while binding on members, were not enforceable for consumers who had the option of taking the matter to court or else to a Dispute Tribunal.
Although the FSCL has seen its caseload double in its second year of operation, Taylor said public awareness about the schemes as a new recourse for consumers remained poor.
"By and large the majority of our participants are doing a good job understanding the new regulatory regime and fixing up complaints internally, if they get them, but I still believe consumer awareness is low. I'm even amazed among professional organisations, including solicitors and accountants, who haven't heard of the new regulatory regime."
Taylor said most of the cases the FSCL had dealt with to date related to insurance complaints with travel insurance complaints among the more contentious. (Amanda Morrall reports on the FSCL's 2012 annual report here).
"People really need to look at the policies closely because they are quite limited in scope. Some are limited to a max 35 days of travel so if you are away more than that you have no cover whosoever from day one of your travel. Some people would be quite shocked to know that."