Aifa is calling for a review of the Financial Ombudsman Service, which it says should operate on a no-loss, no-fee basis and be subject to UK law.
It says the ombudsman is acting as a second-tier regulator and is urging all political parties to review the FOS’s role in the UK regulatory structure.
It is calling for the introduction of a long stop for IFAs and a no-loss, no-fee system so advisers are not charged a case fee where a complaint is not upheld.
It also wants to see complaint management firms included in the ombudsman’s annual levy and the FOS subject to the rule of law and bound by legal precedent.
Director general Chris Cummings (pictured) says: “We are concerned that the ombudsman has become a second-tier regulator to the FSA. The FOS needs to be a smaller, cheaper operation, sharing resources with other parts of the regulatory structure.
“IFAs should be protected from erroneous claims with the introduction of a no-loss, no-fee system. At present, 79 per cent of the FOS’s funding comes through the case fee system, with the balance through the annual levy. It is unfair for firms cleared of any wrongdoing to be paying such a large percentage of FOS fees.
“The lack of a definitive long stop means financial advisers are subject to infinite liability. Despite the very few cases brought against IFAs and the significant amount of consumer trust the profession enjoys, it is completely unacceptable that IFAs should be subject to rules that no other profession is.”
Yellowtail Financial Planning managing director Dennis Hall supports Aifa’s calls but says there should not be a long stop if advisers are still getting trail commission.
He says: “In principle, I agree with the introduction of a long stop but, on some contracts, trail and renewal commission run for longer than 15 years. If advisers are still being paid for a product, then there should be some liability.”