What Happens When an Adviser Gives Bad Advice?

IDR → AFCA → regulator: the full consequence chain in plain English

Step 1 — Licensee IDR (30 Days)

Complain to the licensee, not just your adviser, citing RG 271: state each breach plainly (e.g. no alternatives analysis, undisclosed fees, unsuitable SMSF switch), attach SOA, FSG, fee consents, statements and a loss calculation, and demand the written IDR response within 30 days for standard complaints (45 super trustee, 90 death-benefit, 21 credit default). The letter must state outcome, reasons, AFCA rights with contacts and time limits. Keep lodgement proof — AFCA generally requires IDR completion first and complaints within 2 years of the IDR response. See RG 271 rights.

Step 2 — AFCA: What It Can Award

AFCA covers inappropriate advice, best-interests failures, incorrect fees and misleading conduct, testing breach, causation and but-for loss — what position would you be in with appropriate advice? Remedies include fee refunds, corrected calculations, claim payments and compensation for direct loss (generally to $631,500 per claim under January 2024 caps; claim limit ~$1.263m; super unlimited in some classes; plus interest/costs). Non-financial loss is capped low (~$6,300). Firms pay case fees and are bound if you accept; rejecting preserves court rights. AFCA delivered over $1.07b systemically-flagged compensation historically and must refer systemic issues to regulators under RG 267. Guides: AFCA help and ombudsman process.

Evidence Pack That Wins (Checklist)

AFCA tests breach, causation and but-for loss — assertions without documents lose. Bundle: (1) SOA/ROA plus FSG and PDS cooling-off pages showing disclosure gaps; (2) fact-find versus recommendations gap table (goals, risk profile, capacity) mapping each s961B safe-harbour miss; (3) fee arithmetic — SOA quoted versus FDS charged versus benchmark medians ($4,700) with dollar totals over 1/3/5 years; (4) alternative quotes the adviser should have compared (lower-fee fund, retained super cover, stepped vs level); (5) statements showing loss versus but-for position (e.g. staying in original fund); (6) chronology with IDR lodgement proof and response. Dixon-era outcomes (98% of determined advice complaints upheld, $35.6m awarded) show documentation beats testimony. Attach an AdviserCheck six-layer report as index — adjudicators triage faster with severity-ranked, evidence-linked findings across completeness, best interests and fees.

Step 3 — ASIC, Breach Reports and CSLR

ASIC does not resolve individual compensation — it polices licensees via bans, licence conditions and court action on breach reports (RG 78: significant within 30 days), IDR data dashboards and AFCA systemic referrals under RG 267. Recent enforcement (Shield Master Fund bans, fee-for-no-service actions, unregistered-advice infringements) began as consumer complaints with strong files. Your AFCA evidence pack doubles as an ASIC misconduct report where advice was unlicensed, conflicted or loss-causing at scale.

Your AFCA evidence pack doubles as an ASIC misconduct report where advice was unlicensed, conflicted or loss-causing at scale. The Compensation Scheme of Last Resort covers narrow unpaid AFCA determinations (generally advice-related, capped, eligibility-tested) — treat as backstop, not first resort. An AdviserCheck report mapping s961B/G, fee and contradiction findings into IDR/AFCA forms shortens triage and sharpens quantum.

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Frequently Asked Questions

How long do firms get to respond?
30 days standard; 45 super trustee; 90 death-benefit distribution; 21 credit default. Written reasons plus AFCA details required.

What compensation is realistic?
But-for direct loss to caps above, plus fee refunds and interest. Non-financial loss is small. Document quantum with statements, not assertions.

Can AFCA revisit super trustee decisions?
Yes within its super jurisdiction, including death-benefit distribution complaints under longer timeframes.

Should I go to ASIC first?
No for compensation — IDR then AFCA, after confirming AFCA membership via the firm search. Report to ASIC in parallel where misconduct is systemic or ongoing.

What are AFCA time limits?
Generally within 2 years of the licensee's IDR response (6 years from the issue for super trustee complaints, longer for death-benefit delays). Lodge promptly — late complaints need exceptional circumstances and supporting evidence.