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Apfa: Three crucial failings the FOS must address


Since its inception, the Financial Ombudsman Service has been the subject of criticism from complainants and financial services firms alike on grounds including impartiality, adjudicator competence and the underlying assumptions made.

We launched a project to identify and further analyse these concerns, and found there are real issues regarding the FOS’ decision-making that need to be addressed.

At the very least, it is necessary for the FOS to more clearly and publicly state those standards to which it holds its adjudicators and ombudsmen and the kind of training and guidance it provides.

Most public organisations have to publish similar levels of information and it is not unreasonable to expect a body that acts as the investigator and ultimate arbiter on claims made against financial services firms to do likewise.

My word count here precludes me from giving out the full list of areas we have received complaints about but, for me, the three key issues advisers should be aware of include:

1. Equal access to hearings

Many of you, like us, will have had conversations with FOS outreach officers who state that “any time an adviser wants to discuss something, they should pick up the phone”. Yet advisers tell us over and over again they are simply unable to get through to an adjudicator or ombudsman when necessary.

This lack of access is in stark comparison to what advisers tell us about the access of the complainant to adjudicators: evidence compiled thus far suggests far greater ease of access between the complainant and the FOS.

2. Independence of the review

Advisers need confidence that an ombudsman service which investigates and decides cases – and where there is no external appeals process – is completely impartial and fair at every stage. This is particularly the case when an ombudsman is asked to review a decision previously made by an adjudicator.

There is a perception in the industry that an adjudicator will draft the text of the ombudsman’s decision. We are currently pressing for clarification from the FOS as to what framework and processes it has in place to ensure ombudsmen are able to independently review adjudicator decisions.

3. Not considering investments within the appropriate context

I have been sent many cases demonstrating adviser concern that in assessing the evidence in those instances where the FOS finds against the firm, this decision has been taken because one specific element within a portfolio was considered to be too high risk for an investor – without seeming to take into account the risk of the overall portfolio.

Similarly, we have evidence of cases where a final FOS decision did not seem to take into account the fact market conditions at the time meant the advice to pursue investing in a particular product was sensible.

Other concerns raised include assumptions underlying the calculation of redress (in particular, the indices and interest rate) and the apparent lack of proper guidelines governing when or not a complaint is split into separate cases (which effectively multiplies the maximum amount of redress a complainant can be awarded) alongside many others.

The FOS appears willing to engage with us on these issues and we understand its situation is complex: it is difficult to treat the issue of FOS decision-making in isolation as the framework within which it operates and the kinds of decisions it makes are influenced by factors including the FCA’s regulatory approach and the lack of a liability “long-stop”.

However, the volume of complaints indicates that advisers’ concerns are based on more than just “unlucky one-offs” and it in everyone’s interests the FOS has the processes in place to ensure it is fair to consumers and financial services firms alike.

Caroline Escott is senior policy adviser at Apfa



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 23rd June 2015 at 8:30 pm

    “must address”? What if it doesn’t?

  2. If it doesn’t it nudges the market in directions which are ultimately to consumer detriment.
    Eg increased “back-covering behaviour, reduced willingness of the industry to behave collaboratively with FOS, reduced willingness to remain in or enter the financial advice arena

  3. I mean what will APFA do if it doesn’t?

  4. Bearing in mind that Caroline has recently been appointed as senior policy adviser, can she clarify why she is commenting on the longstop on behalf of APFA rather than joining APFAs Longstop working committee? If she has views as policy adviser, I for one want to know them and want her involved in the discussions we are having with the FCA (or are supposed to be bearing in mind the last one was cancelled by them).

  5. I couldn’t agree more with points 1) and 2). Fortunately, we’ve only appealed against a decision twice (over 20 years), and both times it appeared the Ombudsman had cut and pasted the adjudicators decision and not even made mention or referred to the additional points we raised subsequent to the adjudicators decision. I’ve also had experience of adjudicators looking at something in isolation and not considering whole of portfolio – despite the suitability letter making it clear that this was the approach taken when making the recommendation, it’s absolutely ridiculous. How can you provide proper holistic financial planning advice if you can’t construct a varied portfolio using different asset classes to accommodate the clients attitude to risk, appetite for risk and capacity for loss?

  6. Sorry, that should say points 2) and 3)

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