I am constantly staggered at how this industry tolerates the waywardness and irrationality of the Financial Ombudsman Service.
The mindless drift towards ‘consumer enfranchisement’ continues unabated and is campaigned for relentlessly at Westminster, in the popular press and in a deluge of unbalanced television and radio programmes that purport to champion the downtrodden Clapham omnibus user. Maybe we are worn out by the onslaught.
Now this is the point where some true believer reaches for their pen and accuses me of anti-consumerism. Not true, I am in the business of keeping my clients happy, and some have been with me for more than 30 years. The problem is the official mindset that starts from the premise that if somebody levels a complaint there must be something wrong; smoke and fire, if you will.
Do not get me wrong, consumers have been and are being regularly ripped off and mistreated. This will never stop, it is part of the human condition, and some will inflict bad advice through idiocy or perhaps a propensity to profiteering. But there is a major difference between genuine rip-offs and speculative or hindsight accusations of misselling.
Financial services firms appear to be fair game for any instance where a client is disappointed with investment performance or some other personal determinant of what constitutes ‘good’.
The payment protection insurance affair is a prime example, where consumers have been led to believe the institutions are so inherently venal they are fair game for misclaiming. How many billions of unwarranted compensation have been paid out to consumers who knew what they were buying and may even have claimed on the plans?
The FOS parades itself as balanced and fair and points to the low level of complaints against advisers.
When it suits, the FOS likes to equate itself with the court system – and the chief ombudsman’s salary is equivalent to that of a High Court judge, although the similarity ends there. Previous adverts for the position have stated that legal experience is not considered necessary. Quite.
Can you imagine the outcry if on arriving at court the judge turned out to be a trainee butcher who fancied a change of career and the opposing solicitors’ CVs boasted of clerical experience at a bank? This would not be tolerated and nor would it gain approval if the appeal process was heard by friends and colleagues of the original judge and legal advisers.
There are many things wrong at the FOS: unqualified adjudicators, lack of an independent appeals process, a refusal to allow oral hearings, deflection of lawful rejections. However, the main problems are arbitrary adjudications and final decisions that, despite the automatic rebuttals, seem slanted towards believing the complainant.
When the FOS receives these accusations it responds with all the sincerity of a wounded weasel, telling us the regulator drew up the rules and it only follows them.
It is, of course, politically convenient to have some mechanism that satisfies consumers and their salaried advocates. Having such a mechanism is the important thing, ensuring that it is balanced and fair and follows the law appears to be of secondary importance.
Alan Lakey is partner at Highclere Financial Services
The root problem runs a lot further than the skills of the FOS personnel, and goes to their mandate and indeed perceived mandate.
Parliament ostensibly gave FOS the power to determine complaints on the basis of what the Ombudsman believed to be fair and reasonable.
During the committee stages of the Bill, one proposed amendment was that the FOS should determine complaints on the basis of the law and the regulations. This was withdrawn however after the then Economic Secretary, Melanie Johnson, gave the House an assurance that cases would nearly always be determined with reference to the law and regulation, and only in occasional or rare circumstances would the Ombudsman need to depart from this.
These days, one reads Ombudsman’s decisions and is left wondering whether anybody there even cares, let alone knows, either the law or the rules.
A telling remark by Walter Merricks explains all that is wrong with the service.
I asked him why the FOS ignores SI2326, the statutory instrument which tells them to take into account the stance of the previous ombudsman body when assessing jurisdiction on pre 2001 advice.
He stated, “we do take it into account and ignore it”
Largely agree with all you say Alan apart from one point and it is one of “tolerance” personally I don’t think we do tolerate FOS or any other
We are as a profession, as an industry completely surrounded on 4 sides by the treasury, regulator, FSCS and FOS, and pressure on one side is counterbalanced by the other 3. All citing complete deniability for each others actions and a ability to refer to each other and their rules, a joker card if you will.
The holy grail is; how do we collectively or individually change the said status quo, is it a realisation of “we can’t” ? or do we just keep banging away at the weak points ? keeping the bigger issues to one side ? I think cracks are starting to show (albeit small) the FCA are starting to make some big mistakes, FOS I like to think and believe are starting to be found out, FSCS are profiteering, and above all we realise its all a scam by the treasury to extort more money (fines) and ignore the law.
Maybe the tolerance you speak of should be viewed “give them enough rope and THEY WILL hang themselves”