Only 2% of FOS complaints against IFAs

19 May 2010 9:34 am | By Paul McMillan

Acorrding to the FOS annual report, published today, IFAs were responsible for 2 per cent of all new complaints, compared to 3 per cent the previous year.

Banks were responsible for 61 per cent of complaints, followed by general insurers with 11 per cent and life insurance and investment providers and GI intermediaries, both with 8 per cent.

The report also raises concerns about one high street bank targeting older customers with investment bonds. It says it has upheld many similar cases where customers were not suited to the product (see below).

The FOS upheld 39 per cent of complaints against IFAs, compared to 94 per cent of complaints against GI intermediaries selling PPI, 52 per cent of complaints against banks, 48 per cent for mortgage/bank advisers, 44 per cent for general insures and 31 per cent for life and investment providers.

Half of the total number of disputes referred to the ombudsman service involved four of the UK’s largest financial firms.

The FOS says it resolved a record 166,321 disputes in the 2009/10 year, an increase of 46 per cent.

The proportion of complaints referred to the FOS by claims management firms increased from 26 per cent to 28 per cent of cases.

The biggest complaint area was PPI, responsible for 30 per cent of complaints, with current accounts responsible for 15.5 per cent, credit cards 11 per cent and mortgages 4.5 per cent. Mortgage endowments made up 3.5 per cent of complaints.

There was a 27 per cent fall in investment and pensions complaints with mortgage endowment complaints continuing to fall. Complaints about personal pension and annuities fell but complaints about unit-linked bonds and portfolio-management complaints increased. The FOS noted a number of pension switching complaints following the FSA’s review.

There was a 9 per cent increase in complaints about investment-linked products with the FOS highlighting one high street bank which has been targeting investment bond sales at older customers.

The report says: “A particular group of cases involved a specific high-street financial institution that targeted the sale of investment bonds at older consumers. In these cases, the consumers were usually investing money for their retirement and frequently had little or no previous investment and savings experience beyond deposit-based accounts.

“The bonds concerned contained a degree of risk that prompted us to ask whether the consumers understood and were suited to this type of financial product. We upheld many of these cases in favour of the customers, as the financial institution was unable to persuade us that these consumers would have been looking for extra financial risk given their age.

“In assessing complaints like these, the individual circumstances of the consumer at the time of the sale are vital. It is evident that some businesses believe that giving us copies of the product literature – containing explanations of how the product worked – should be enough to convince us that consumers must have been aware of, and have accepted, the risk inherent in the product.”

FOS chief ombudsman Natalie Ceeney (pictured) says: “We are working to reduce the length of time it takes us to allocate cases to our adjudicators and ombudsmen - so that we can resolve disputes more quickly, something that is clearly in the interests of both parties to a complaint.

“We will be doing some research over the summer to explore how the financial services industry and consumers with complaints would most like to interact with us in the digital age. And we are in the early stages of rolling out a more standardised and simpler way of communicating our decisions, so that everyone can see clearly what decision we have reached, and why.”

If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing