Over the years I’ve been contacted by numerous compliance consultants, seers and experts of one sort or another who have attempted to point my firm in the ‘right direction’ to avoid regulatory opprobrium and the potential for complaints.
These theorists tend to focus on mitigating risk by setting out client requirements in plain English whilst explaining all benefits and pitfalls in a balanced manner. Such tactics have led some advisers to send 30 page suitability letters with appendices and brochures sufficient to disturb even the most laid back woodsman.
The truth is that complaining has now jumped ahead of bingo as a national pastime. With the help of claims mongers, a liberal sprinkling of fraudsters and opportunists, and under the benign gaze of the FOS, this behaviour looks likely to worsen before it gets better.
The recent focus on execution-only is timely because I have been made aware of a Yorkshire-based firm which, having survived thirty complaint-free years, has been targeted by a claims monger and two toxic clients.
Back in the 1980s the adviser was separately approached by these two individuals who expressed great concern that their employer was going bust and that their pensions would be forfeit.
They each asked the firm to transfer their funds into a personal plan and the firm agreed to do this on an execution-only basis.
With hindsight the adviser made a serious error by selecting a suitable pension provider.
To him this seemed both sensible and reasonable as the clients had little knowledge of pension providers.
Subsequently the firm transferred the clients into lower charging stakeholder pensions and arranged investments for them.
Jump forward 20 plus years and the individuals approach or are approached by a rabid claims monger which deduces that for a 25 per cent fee it can get them some of that lovely compensation that PPI policyholders have been wolfing down for some time.
The claims monger wrote to the firm listing numerous allegations, some of such startling imbecility as to trigger care in the community officers into writing urgent reports.
The firm replied explaining that the pension transfers were execution-only and rebuffed the other defamatory claims. They also suggested that the claims monger get its facts right before levelling allegations.
This elicited an excited response brim-full of threats that the regulator would investigate them with enforcement consequences. I brought these tactics and the letter to the attention of the MOJ yet, despite promises to investigate, the firm continues trading.
The allegations were escalated to the FOS which took copies of the files and in depth responses explaining in detail what had occurred and why the complainants, in those pre pension-protection days, had genuine concerns.
The FOS responded that it did not consider the transfers to be execution-only due to the adviser selecting a provider. It also issued its standard paragraph outlining how the lack of a longstop enabled it to assume jurisdiction of a twenty-five year old case.
The adjudicator reached a relatively quick decision upholding both complaints. Even though the file stated execution-only and the clients had signed to this effect the adjudicator found ‘insufficient evidence’ to support this.
As a consequence he considered that all subsequent transactions to be linked to the original advice and the adviser may have to pay tens of thousands of pounds – not in compensation but in PII excesses on each of the individual complaints.
The case will now go before an ombudsman who just might use common-sense and make a sensible judgement although personally I feel as confident as when I’ve made my Grand National selections.
Alan Lakey is partner at Highclere Financial Services