FSA attacks IFAs' FOS complaint "myths"
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The FSA claims IFAs are wrong to use Financial Ombudsman Service statistics as evidence that the independent advice sector provides a better service than the banks.
In its first RDR newsletter, the regulator says advisers should not use the fact they are only responsible for 2 per cent of all FOS claims as evidence for why the RDR must be focused on banks and not IFAs.
In a section entitled “myth busting”, the FSA says that instead of looking at all FOS complaints, advisers should focus on data is generated from products and services provided by both banks and IFAs- such as investments and pensions.
The FSA says 14 per cent of new cases referred to the FOS in 2009/2010 relate to products provided by both banks and IFAs, 22,278 out of 163,012, and of this number 50 per cent were upheld.
The regulator says IFAs accounted for 12 per cent of investment related complaints, compared to 29 per cent for the banks. For pensions, IFAs accounted for 28 per cent of complaints and the banks 10 per cent. However, the newsletter fails to give a breakdown of how many upheld complaints are from the banks or IFAs. The FOS annual review for 2009/10 says that 52 per cent of bank claims were upheld compared to 39 per cent of complaints about IFAs.
The newsletter says: “Some IFAs argue that, because only 2 per cent of complaints that go to the Financial Ombudsman Service (the ombudsman service) are levelled against IFAs, the independent sector provides a better service than the banks, and so the RDR should be focused solely on improving standards in banks; we do not accept this.”
The regulator also says FOS complaint stats underestimate industry problems as many consumers may not realise that they have been missold a product.
The newsletter says: “The evidence suggests that there are problems that need addressing, irrespective of the firm type (small or large) or advice service (independent or restricted).”
The newsletter also raises concerns about IFAs that are looking to move to an introducer role after 2012 to avoid the RDR’s qualification requirements. It warns that introducers must not offer personal recommendations or promote any products.
The newsletter says: “If you give a personal recommendation or promote a retail investment product you must comply with the RDR rules, and therefore have to meet all the requirements. The key point is that the rules are about the activities you undertake, not your job title.”
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Readers' comments (53)
Chris F | 9 Feb 2011 2:07 pm
Boy, they *really* hate IFAs, don't they?
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Hugh Jeego | 9 Feb 2011 2:07 pm
There are lies, damned lies and then FSA RDR Newsletters.
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Lee Chester | 9 Feb 2011 2:08 pm
Why shouldn't IFAs use the stats from the FOS??
We all know banks mis-sell, most bank customers won't get an independent viewpoint unless they are high net, they are sold overpriced products on brand and are not getting a true picture of the market and other available, potentially more suitable, products..
Barclays have even said they will stop offering financial advice to their clients unless they are high net as there is no money in it?! At least they are honest.
FSA defending banks again....its getting boring.
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Steven Farrall (Adviser Alliance) | 9 Feb 2011 2:13 pm
I can smell Hoban all over this...
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Rod Leonard | 9 Feb 2011 2:19 pm
bearing in mind the IFA sector has more than 60% of retail distribution it is amazing what the FSA can do with Figures. If Ifa's are responsible for 2% of all complaints and 1% of total complaints were upheld that suddenly becomes 50%, which is far worse than (say) 20% of 60% of the total, (according to them) or to put it another way 33% of all complaints upheld against banks rather than 1% against IFA's. Can you do my accounts for me please Mr FSA.
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Alan Lakey | 9 Feb 2011 2:22 pm
Firstly, we can be assured that if the figures were reversed the FSA would be quoting them ad infinitum to back their RDR assertions.
Secondly, they are correct that many of the bank complaints relate to current accounts or other non-adviser activity.
Fortunately the FOS information is sufficiently detailed that we can locate the true figures.
Pensions
28% IFAs
15% Banks, B.Soc,s & Stockbrokers
Investments
12% IFAs
38% Banks, B.Soc,s & Stockbrokers
Mortgages
27% IFAs
73% Others
When we look at the FSA product sales data we can see that IFAs have 80% of the pensions market so quantifying the data shows us that we are 100% more effective than banks in terms of having complaints escalated to the FOS.
Yet again we are subjected to false accounting, dodgy arithmetic and dubious calculations.
Perhaps this is why the cost benefit analysis keeps tripling?
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Richard Arnold | 9 Feb 2011 2:22 pm
An improving situation without RDR - difficult to justify the cost?
The FOS Says :-
"IFAs were responsible for just 2% of complaints to the FOS in 2009/10, compared to 61% for banks.
The fall in complaints against IFAs reflects "the levelling-off generally of complaints to the ombudsman service about investments and pensions".
Of the complaints received about investment products, 12% were IFA related, though this more than doubled to 28% for complaints against IFAs about pensions."
Importantly,
61% of complaints against IFAs were NOT UPHELD.
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Mr Smug | 9 Feb 2011 2:22 pm
Well, no doubt whoever is responsible for 59% of investment complaints and 62% of pensions complaints can no doubt expect to feel the full heat of regulatory intervention.
Unless these figures are b*ll*cks of course.
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Bob Wilson | 9 Feb 2011 2:23 pm
What would moaning IFA's do without the FSA every time you lot think about sitting an exam the FSA upset you and you can then spend your time moaning!!!!!!
Banks receive unbelievable numbers of complaints on PPI and Bank Charges hence there is a number discrepancy compared to IFA's who don't sell these products.
Besides it looks like IFA’s are too busy mis-selling Pensions to sell anything else!!!!
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Alan Lakey | 9 Feb 2011 2:24 pm
I might add, as a counter balance. Whilst there may be many consumers who do not complain because they don't know they have been mis-advised there are also a phalanx of claims mongers and opportunistic consumers taking every opportunity to complain in a vexatious manner.
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