Why do clients complain about good advisers?


Nicolas Crowhurst

Executive summary

Even the best professional will receive a complaint from time to time. Some are unsubstantiated, and some are valid. Both are opportunities which can benefit your business through responding to valuable feedback of either a problem, or the perception of a problem.

At the most basic level, clients complain when there has been a breakdown in communication which leads to a mismatch in the expectations of the client and the adviser. When things don’t go the way the client expects, a fundamental trust is broken about a sensitive issue, money, which is something a lot of people have a hard time talking about.

That’s when the emotional reaction sets in and people get upset. When people are emotional, they are incapable of properly processing logical arguments. Before you can convince the client with rational and logical explanations, you need first to reduce the emotion in the discussion – both theirs and your own.

What is a complaint?

The international standard definition

According to the international standard on complaints handling,[1] a complaint is an

expression of dissatisfaction made to an organization, related to its product or service, or the complaints-handling process itself, where a response or resolution is explicitly or implicitly expected. Complaints can be made in relation to other processes where the organization interacts with the customer. Complaints can be made directly or indirectly to the organization.

Breaking this down, complaints can be:

  • about products, services, general communication or responses to other issues raised
  • unclear in what the client wants to happen
  • made directly to the business or via other avenues such as social media

It’s therefore worthwhile to properly consider applying internal dispute resolution (IDR) processes as early as possible and not discount “expressions of dissatisfaction” as just a whinge or a throwaway comment. If the client has taken the time to air the issue, it’s likely important to them so needs to be acknowledged properly if you want to retain the client. Complaints can quickly escalate if the client thinks they are not being heard.

A complaint is a gift

More importantly though, complaints are free customer satisfaction surveys providing opportunities to improve your business. Clients will generally expect good service so will not think twice about your business if things are proceeding the way they expect.

When a client complains but ultimately receives an unexpectedly beneficial or well communicated outcome, they are more likely to be well disposed to the business. A good response to a complaint is generally not expected, so a business with a complaint against it can build client loyalty if it can provide an empathetic, informative and fair outcome to a problem being raised.

How do complaints arise?

In the financial advice sector, the Australian Financial Complaints Authority (AFCA), regulators, politicians and professional associations often talk about restoring trust or building trust.

When dealing with complaints, though, building trust takes far more than a generic platitude or a quick, ill-considered response.

The trust between adviser and client is sacred

The law requires advisers providing personal advice, broadly, to understand properly their client’s financial circumstances. This requires advisers to ask about all the aspects of the client’s finances – both income and expenses as well as their objectives and needs.

The problem arises in human nature.

Many of us lie to even our nearest and dearest about money. We downplay the cost of some purchases and outright hide others.[2] Some inflate their income and net worth and are overconfident about their knowledge of financial matters to appear educated or sophisticated. This may almost happen unconsciously.

Sometimes, we lie about our financial situation because it is dire and we’re ashamed. Despite it being a widespread issue, the social stigma of being unable to meet debt remains strongly ingrained within the community.

Yet the first thing an adviser, a complete stranger, does with a new client is the Fact Find. The importance of complete honesty is stressed and reiterated, and the client has to weigh their own emotional feelings and reluctance to be honest against the gamble of trusting an adviser who is promising to make the client’s financial situation better.

This is why the trust is so deep. The true state of a person’s finances is a closely held secret for many. The trust the client places in the adviser is therefore strong.

Broken trust between adviser and client is deep and painful

When things do not go as the client expects, this trust is rocked.

Remember, the implicit (or express) promise which won the client over to the business is that the adviser will make things better for the client financially. Irrespective of the reason the expected returns are not eventuating, the difference between the client’s expectation and actuality causes doubt to set in.

The client begins questioning whether they have done the wrong thing – made the wrong choice or trusted the wrong people. This self-doubt adds to the shame and worry.

Human nature again causes a reaction where the client seeks an explanation which absolves them of being wrong.

Often, the two most ready assumptions are either they were lied to, or otherwise wronged. If either (or both) are believed to exist, the deep trust can be broken and the resulting shame and hurt can be consuming.

Emotional people make irrational and sub-optimal choices

There are many psychological studies[3] which explain that people who are in a heightened emotional state make poorer choices than those who can apply a calmer consideration to an issue. Emotionality-affected people are also more likely to draw invalid inferences in response to emotional (compared with neutral) statements.

And yet, we should expect emotion in all people – particularly clients – at times when they receive bad financial news.

When faced with a complaint, it’s vital to try to reduce the level of emotion in the conversation before trying to provide logical dispassionate responses. If you avoid lowering the heightened emotions, logical responses appear cold and unfeeling, spiralling the conversation off track further and making things more difficult to manage.

How to avoid complaints escalating

There are three broad avenues for businesses to avoid complaints escalating: Prevention, Mitigation, and Resolution.


It may be obvious to say, but avoiding surprise or poor outcomes for clients is the first objective. Prevention means avoiding something going wrong in the first place and is predominantly managed through good compliance and risk management practices. Following properly documented policies and procedures will help manage the likelihood of something going wrong, as well as the potential impact if it does.

The most emotional and bitterly contested complaints are often where these processes have not been followed. The cliché of needing to avoid giving advice at the “BBQ conversation” (which usually does not include applying the normal client protections) is particularly relevant as the client may envisage a more personal adviser-client connection, which only heightens the breakdown in trust.


Early engagement with the client is vital to reduce the impact when a complaint is first raised, both for the client and your business. Time spent dealing with complaints is time away from revenue-generating work, so getting in early, acknowledging the issues (whether valid or not) and explaining what the adviser will do to address the concerns is vital in quickly resolving the issues to a point where everyone can move on.


While businesses can gain opportunity from a complaint, there are inevitable and unavoidable costs that arise. Financial compensation is only one factor to consider when considering what is needed to resolve a complaint. Other impacts to consider are staff resources, management time and confidence, reputational damage, regulatory risk, ongoing revenue streams from the client and so on.

Resolution is often a commercial decision. Commercial decisions need to be made dispassionately and without emotion. It is why there is often a shift to the legal or compliance team (if available) at this stage to provide a more objective assessment.

When considering how much time to devote to fixing an issue, or whether to compensate the client for something which has gone wrong, these indirect costs should be factored in. If four members of staff (for example the adviser, the line manager, legal adviser and compliance manager) are all going to be engaged in dealing with the complaint for 2 hours each, the resourcing cost can quickly mount up. However, the cost-benefit analysis will be different in each situation.

That being said, whether, and how, to resolve a complaint is a decision for each business depending on the circumstances of the complaint. It is perfectly acceptable to stand on principle for something you are passionate about and accept the costs of doing so. It is also desirable to consider the broader implications of any resolution on the business model, particularly if the complaint has highlighted systemic issues which may affect multiple clients – all of whom should be contacted proactively to resolve the issue before they realise they have one.

The adviser is the best person to restore the trust and save the relationship

The adviser, as the person who was given the trust, will often be the first point of contact for any complaint and has the best chance of mitigating the damage. It is important that, in the first instance, the adviser has an opportunity to try to front up and seek to resolve the issue quickly, after listening to the client’s concerns.

Internally, of course, the business must recognise that a complaint has been made and escalate, record and address it appropriately according to its internal procedures and regulatory requirements.

In the initial contact, the client will often be looking for reassurance, or some evidence the situation is not how it looks. It can often be quite friendly, sometimes timid, although some clients will immediately jump to being quite confrontational.

What is important is listening and acknowledging that the concerns are validly raised and will be considered.  If the adviser brushes aside concern (whether explicit or implicit) the client, already in a level of emotional distress, will feel abandoned by the person they trusted.

This also applies where the adviser recognises the complaint and refers the client to a manager, the compliance team, a customer advocate or complaints team, group legal or any one of a number of avenues that might be available to avoid the adviser needing to respond directly.

This is human nature too. Escalating the complaint is fine, but it needs to be carefully managed and clearly communicated why doing so is in the client’s best interests.

An adviser instinctively knows the trust that has been placed in them. When a client’s expectations are let down, particularly if the adviser is being blamed personally, it is natural for the adviser to eventually become defensive and withdraw. However, from the client’s perspective this is further evidence the person they trusted is not to be trusted any more.

If the adviser can engage openly and honestly with the client early, though, this minimises the build-up of emotion in the complaint and enables a more rational discussion about options to get back on track.

Know where to concede, where to compromise and where to push back

The first thing the adviser needs to do is to manage their own emotions. In AFCA’s experience, the need for this is more common in single-adviser licensees where it is the adviser’s own work under challenge.

However, doing so enables the adviser to engage rationally with the issues being raised and not add their own emotions into a process that already needs fewer heightened feelings. If necessary, write what you feel in an email, and then have a colleague or friend with high social empathy read it over and edit it for you.

Secondly, the adviser should look objectively at what is being claimed.

Avoiding being defensive and accepting fault if it is valid to do so will go a long way to both removing the emotion from the conversation and demonstrating a willingness to work cooperatively to a solution before things escalate further. After all, mistakes happen, and most people will accept and forgive this provided the response is a positive experience.

Try to look at the issues being raised from the client’s point of view and picture how they, without the benefit of being a professional in the area, might have understood what was going on. Often complaints arise from simple misunderstandings which can be explained and remedied if we take the time to do so. Remember – the intent of the adviser is not relevant at this point. It is what was reasonably heard and understood that is being assessed.

Thirdly, know where to hold your ground. High-conflict personalities exist in the world and these people may raise unmeritorious or unsubstantiated accusations for the sake of seeing what they can get out of it. They are often less concerned about establishing liability (see below) than they are about getting a quick concession and a payout.

In those less common scenarios it is appropriate and necessary to draw a line on an important issue and push back against the relevant accusations where they lack substance.

Why are complaints escalated to AFCA?

If you are lucky enough to have no idea who AFCA is, well done as you’ve not needed our services.

The Australian Financial Complaints Authority is the external dispute resolution scheme for the financial services industry, operated by an independent, not-for-profit organisation Australian Financial Complaints Authority Limited. If a complaint cannot be resolved through your internal dispute resolution (IDR) processes, it can be escalated to AFCA.

Ultimately, complaints are referred to AFCA because the parties have been unable to reach an agreement they can both live with and cannot move on from the issues in the complaint.

Far too often, complaints are referred to AFCA because the business has not engaged with the issues being raised and the client does not feel heard.

What is AFCA looking for to resolve the complaint?

AFCA has several stages in its complaint resolution process and different things are needed at each stage. While the complaint resolution process is out of your hands at this point, each stage, facilitated by AFCA staff, provides an opportunity for you to repair the client relationship or your business reputation and achieve a resolution you and the client can both live with.

While the sections below identify specific things AFCA looks for at different points in the process, it is always expected that businesses have had good faith and honest engagement with the complaint – essentially, that the financial firm has acted fairly to its client both at the time of the alleged conduct and through the complaints process.

Early case management

In simple terms, this early stage covers the registration and early investigation stages of the process.

At this point, AFCA will be looking for a thorough IDR process and outcome which has engaged with the issues being raised by the client, not the issues which the business wants to address. Given the obligations under regulatory guidance,[4] it will be a concern for AFCA if the relevant financial firm is unable to demonstrate the internal complaints process has been engaged in efficiently, honestly and fairly.

Conciliation and negotiation

This stage focuses on identifying points of common ground and agreement – either because everyone agrees on the facts, or because sensible concessions have been made by one of the parties.

The issues remaining in dispute can then be clearly identified and AFCA will work with both parties to try to establish the party’s worst, best and most likely scenario based on the information available at the time. Thinking about the likelihood of a final outcome not being at the extremes of total vindication or total loss can encourage parties to think less emotionally and encourage more rational assessments of what would allow them to move on.

In AFCA’s experience, this is the stage where the most successful resolutions can be achieved by mutual agreement.

Late case management

This is the stage in the lead up to a preliminary assessment (also known as a recommendation), which is a non-binding view of what should happen based on AFCA’s normal approach to similar complaints.

At this stage, AFCA will focus on the residual issues which have not been resolved earlier in the process. The aim is to find an outcome that is fair in all the circumstances to both parties, while having regard to legal principles, good industry practice and other relevant factors. At this point, the parties will be asked more focused, potentially technical or legal questions about their obligations or expectations.

The outcome of this stage should be a clear indication of AFCA’s approach to similar complaints and a reasonable suggestion to resolve the complaint before a final binding decision needs to be made.

This is also the last stage at which the complaint is confidential for the financial firm.


Sometimes, one or both of the parties disagree with the preliminary assessment or recommendation. This can be because AFCA has misunderstood the issues or the party’s submissions on a particular point or has not received important material evidence which would change the outcome.

If this occurs, the matter is escalated to an Ombudsman, Adjudicator or a Panel (‘decision makers’) for a final and binding decision, known as a determination.

At this stage, the decision maker must conduct a fresh review of all the submissions from the parties on the complaint file and ensure the parties not only understand the issues which the decision maker will decide but also the positions of the other side.

As it is a fresh review, the decision maker is not bound by the preliminary assessment or recommendation, but we make every effort to ensure the preliminary assessment is an accurate reflection of AFCA’s approach and is therefore consistent with past determinations.

As a result, at this stage AFCA will be looking to ensure the parties have received all relevant information that might be relied on and had the opportunity to respond to the relevant issues raised.

Importantly, if there is a possibility of a financial compensation award, AFCA will also be looking for agreement about the methodology to be used in calculating the amount of any award and, ideally, agreement on the amount of loss.

The aim will be for the decision maker to examine three main issues:

  • Liability – did the financial firm do anything wrong?
  • Causation – did any wrongdoing lead to a loss for the consumer?
  • Quantum – what was the amount of the loss caused?

To be successful, a client will need to be able to establish each of these. It is possible for the financial firm to have liability, but without it leading to a compensable loss.

As a result, at this final stage, the decision maker will be looking for evidence to either support, or refute, findings on each of these elements.


Maintaining an impartial and objective view of complaints is critical to repairing client relationships and enabling parties to move forward after an unexpected event.

Even up to the preliminary assessment stage of the AFCA process, the control rests with the adviser and those who support them. Being the professional in the adviser-client relationship, it is incumbent on the adviser to be the first to step back from the emotive aspects of the complaint and ensure the way they are handling the complaint serves to diminish, not inflame, the emotional response by the client.

AFCA can help with that, but only if advisers and licensees engage with the process and understand the different approaches and methodologies AFCA uses to try to reach a resolution which is fair in all the circumstances.

By Nicolas Crowhurst, Ombudsman, Decisions – Investments and Advice


[1] ISO 10002:2018 Quality Management – Customer Satisfaction – Guidelines for complaints handling in organisations
[2] The motorcycle manufacturer Harley Davidson, for a $5 fee, will product a second receipt for the amount a buyer wants to say they paid for a bike.
[3] Such as Blanchette I, Richards A. Reasoning about emotional and neutral materials. Is logic affected by emotion? Psychol Sci. 2004 Nov;15(11):745-52. doi: 10.1111/j.0956-7976.2004.00751.x. PMID: 15482446; Doya, K. Modulators of decision making. Nat Neurosci 11, 410–416 (2008). https://doi.org/10.1038/nn2077 and Garces M, Finkel L. Emotional Theory of Rationality Front. Integr. Neurosci., (2019). https://doi.org/10.3389/fnint.2019.00011
[4] Australian Securities and Investments Commission. Regulatory Guide 165 Licensing: Internal and External Dispute Resolution (2020). This will be replaced by RG271 Internal Dispute Resolution on 5 October 2021.

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