Investment complaints up in 2012: OBSI

At the same time, banking complaints are notably down year over year. In 2012, OBSI opened 210 banking complaints, which is down from 397 cases the previous year, or 257 if you exclude complaints involving TD Bank, which withdrew from OBSI at the end of 2011. Banking complaints are now back to 2007 levels, OBSI notes.

In 2012, 200 cases ended with monetary compensation to the complaining client, OBSI reports, totaling just under $3.8 million. This means that clients prevailed in less than a third of cases, representing approximately 31% of all closed case files. Clients were much more successful on the investment side, prevailing in 42% of cases, compared with just 14% of banking complaints.

Investment firms also carried the bulk of the compensation recommendations, representing $3.64 million of the total; just $123,938 in compensation was recommended in banking cases. The average recommendation on the banking side was just under $3,200, with a median of $900. On the investment side, the average recommendation was $22,613, with a median of $11,000. The biggest recommendation was just over $20,000 for banks, and just under $200,000 for investment firms.

Additionally, there were four complaints that ended in some form of non-monetary restitution, such as a corrected credit bureau rating, OBSI reports.

In terms of the time it takes to resolve cases, banking complaints are resolved much faster, with the average case resolved in under 94 days, and straightforward investigations completed in an average of 41 days. On the investment side, the average straightforward investigation still takes 197 days to resolve, and the overall average is 326 days; only 20% of cases are resolved under OBSI’s benchmark of 180 days.

The report indicates that unsuitable investments and advice continue to be the biggest source of investment industry complaints. In the past year OBSI has adopted a number of changes to how it assess suitability complaints, and calculates losses in these case, which it says “will result in higher-quality outcomes and more consistent and efficient resolutions of unsuitable investment complaints.”

OBSI says that leveraged exchange traded funds (ETFs) continue to be a focus of investment suitability complaints. “In some cases we are finding that investment advisors are not aware of the risks and characteristics of the investments they are recommending. In the case of leveraged ETFs this is resulting in some investment advisors not trading the products appropriately and making unsuitable investment recommendations to their clients,” it says.

It says it also investigated a number of complaints involving off-book activity. “While this type of activity is often hard for dealers to detect, it is important that dealers remain diligent in looking for and following up on any red flags that indicate an advisor is engaged in this type of activity. It can be equally difficult for clients to detect when an advisor is acting without the knowledge of their dealer, but clients too must remain diligent to identify red flags and ask questions when their advisor’s activity seems out of the ordinary,” it says.

On the banking side, the largest number of complaints continues to relate to mortgage prepayment penalties (representing about 25% of the total). “As was the case last year, customers are still being charged amounts that they do not expect when prepaying a mortgage,” it says. “While customers should always read and understand the documents they sign, they are also entitled to rely upon representations made by banking representatives.”

The second biggest source of complaints relates to debit and credit card fraud, in which both the client and the bank may be victims. OBSI also says that it is seeing an increase in customer disputes about their credit rating; and powers of attorney are also a continuing cause for concern.

With TD and RBC no longer part of OBSI, the other big six banks account for the bulk of complaints. Scotia ranks first with 67 cases opened, 32% of the total; followed by CIBC at 24%, BMO at 10%, and National Bank at 6%. On the investment side, the bank-owned investment dealers are the biggest source of new cases, although mutual fund giant Investors Group is number one, with 11% of investment complaints. It’s followed by TD with 9%, BMO at 8%, National Bank with 6%, and RBC and Scotia at 5%. CIBC ranks further down in ninth place, with just 4% of complaints.

The report also sets out OBSI’s budget for the year ahead, which predicts that firm fees will decline slightly to just under $7.8 million for 2013.