From www.ifa.com.au: The Australian Financial Complaints Authority defends its use of a “counterfactual approach” in calculating compensation for advice complaints, which aims to determine a client’s potential financial position had they received appropriate advice.

This method has faced criticism for possibly allowing hypothetical losses to influence compensation amounts.

AFCA officials argue that this approach is necessary to ensure fair and consistent outcomes, factoring in market risks while preventing over- or under-compensation due to market fluctuations.