MM Leader: Don't make IFAs scapegoats in Keydata blame game
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The Financial Ombudsman Service’s decision to find against Norwich & Peterborough for its Keydata advice should, of course, not been seen as a blanket ruling against anyone who advised on the firm’s products.
The preliminary ruling, which saw the FOS order N&P to repay £28,000 plus interest to an elderly couple who invested in Lifemark, may have severe implications for the society, depending on its appeal and whether the Financial Services Compensation Scheme decides to start paying out Lifemark claims.
The FOS ruled that the couple were exposed to inappropriate levels of risk and although FOS rulings do not set precedents, N&P could face a very hefty bill, with 3,100 customers sold Keydata policies by branch staff.
The poor standards of investment advice given by tied branch sales staff have been exposed time and again by the economic crisis and we would suggest that, if the FOS ruling is upheld on appeal, the FOS would find very different checks and balances from the vast majority of IFAs who advised on these products.
The Keydata soap opera has already endured too many twists ands turns to list here but it would be hard to hold the IFA to blame for client losses in the majority of cases, unless there were glaring errors in the advice process over risk tolerance. Although there is much to be resolved in the episode, it would be fair to say events outside the usual control of the adviser have taken centre stage.
The FSA’s role in supervising the firm and the knock-on effect of its decision to force the firm into administration due to an unpaid HM Revenue & Customs bill also clouds the blame game.
The FSCS will rule in September whether Lifemark investors can claim for potential losses. This should not be seen as a get out of jail free card for N&P as the FSCS may chase distributors for claims it pays out.
The top priority should be to ensure that investors receive the appropriate redress for their losses but scapegoats should not be created in the haste to pay out.
Again, we must point out that it is unfair for intermediaries to shoulder the total bill for such a complex list of failures through the FSCS levy system - a matter which is likely to be played out in the High Court later this year.
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Readers' comments (1)
Evan Owen | 26 Aug 2010 10:51 am
If IFAs can be made scapegoats by anyone then that is what will happen because their representative bodies are either toothless or penniless, something the fund managers do not worry about too much.
The FSCS declaration that Keydata was an intermediary is one of the most irrational decisions I have seen in all my years of observation of all things FS. I wonder what the judiciary will make of it now that the New Labour thumb is not in its jugular.
As far as the FOS is concerned it will award as much compensation as it wishes, as one adjudicator once said to an IFA "I can do whatever I want" and "you will be getting a reputation".
Be afraid, be very afraid.
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