Can you advise me about trying to get compensation from my previous financial adviser, who I believe gave me incorrect advice. What do I need to do and what will happen to him?
It is important that in cases where a financial services professional has done wrong, for example, by knowingly misleading a client, the details of the case are looked at and appropriate action taken against that individual or their firm.
However, as we move closer to practice in the US, where people readily seek redress through litigation in many areas of life, procedures must be in place to protect genuine claimants and weed out those who are simply opportunists.
I believe you have a valid complaint, so you first need to contact the insurance company that originally sold you the policy, outlining the details of the advice you received. The company will have to follow prescriptive FSA guidelines for responding to you within a stated time period.
The company will have clear written procedures in place that you can ask to see before you make your complaint. These will automatically be sent to you once you have contacted the company.
It may be that you will be satisfied with the response you receive to your complaint. If not, you can approach the Financial Ombudsman Service, which will send you a complaint form to complete.
The FOS is an independent service for resolving financial complaints by looking at each case on its merits. Its decisions are binding on a financial firm up to a total of £100,000. The majority of approaches to the FOS are made by telephone on 0845 080 1800 or you may prefer to write to it. More information on its role and the types of complaints it deals with are available at www.financial-ombudsman.org.uk.
If the FOS rules in your favour, it may make financial awards for any stress or inconvenience caused on top of any other compensation awarded.
The proportion of complaints that are upheld by the FOS is about 45 per cent. People wishing to seek compensation should be clear that a shortfall on a policy is not the same as not having been told the whole picture by an adviser.
There is currently a consultative paper in circulation that consults on reforms to the existing complaints scheme and the FOS. It makes suggestions about how to speed up the conclusion following less serious errors and changes to the way you can refer complaints to the FOS. It also considers changes to the service standards that financial services firms follow to make their complaints processes more rigorous.
The consultation closes on May 30, 2004 and already it has generated widespread discussion among my colleagues as to whether the proposed new procedures provide an equitable balance for advisers. Three issues emerge. First, only 45 per cent of complaints to the FOS are currently upheld. Second, advisers must pay a flat fee of £360 a case (after the first two cases completed each year), whether or not it is a false claim. Third, there is an assumption that the financial adviser is always at fault, even though many advisers claim they have never had a complaint upheld against them.
From a legal perspective, the Financial Services and Markets Act empowers the FOS to impose on firms “such steps as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken)”. This grants the FOS considerable power, which many would like to see made subject to more accountability checks, especially as the FOS website states that it is the biggest regulatory organisation in the world.
The FOS receives around 2,000 complaints a week. For the year ending March 31, 2004, the total number of complaints is expected to be 98,000, of which 80,000 have been resolved. Recent research by the FOS shows that 75 per cent of complainants were happy with the way in which the FSO explained decisions in their case while 70 per cent of financial firms thought that FSO decisions were generally fair.
I would advise all clients to consider very carefully if they have a valid complaint against a financial adviser and ensure that their complaints are not simply about fund performance. In the majority of cases, the financial firm will resolve complaints before redress is sought from the regulator.