Complaints about IFAs plummeted from 12 per cent of total cases in 2006/07 to just 4 per cent in 2007/08.
The FOS annual review says this is linked to a sharp decline in complaints about mortgage endowments, which fell by 70 per cent from 46,134 to 13,778.
Aifa says the figures substantiate its long-held view that the vast majority of complaints brought to the FOS are related to big financial institutions and only a small proportion are generated by IFA firms.
Director general Chris Cummings says: “This is a clear endorsement of customer satisfaction, especially as IFAs are the major distribution channel for financial advice and products.”
Mortgage and banking complaints more than tripled and there was a 10-fold increase in complaints about banks’ charges on current accounts.
The ombudsman says this is probably due to the legal test case in the High Court involving the Office of Fair Trading and eight current account providers.
Fifty-nine per cent of the total complaints received by the ombudsman in 2007/08 were about banks, primarily concerning current accounts, credit cards, mortgages and unsecured loans.
Highclere Financial Services partner Alan Lakey says the figures illustrate the good service that IFAs provide. He adds that when mortgage endowment complaints are factored out, the number of complaints about IFAs is tiny compared with those about banks and big financial institutions.
He says: “This is something the consumer press needs to understand. IFAs are constantly lambasted in the press for their ‘failings’ but this is clearly not the case. Most IFAs understand they give better advice than the banks but what we have not had before is evidence from the FOS to back that up.”
Philip J Milton and Company managing director Philip Milton says the figures will help raise consumer confidence in the advice sector and may draw consumers away from the banks.
He says: “IFAs are getting better regulated and the FSA has got more teeth. In terms of generating confidence, people who have put great faith in banks and building societies may realise that it has been misplaced.”
But Lakey is doubtful that the figures will inspire greater consumer confidence in independent advisers. He says: “It is not necessarily something that will be broadcast by the consumer press and consumers probably will not understand the difference between types of advice. Most consumers do not have an interest anyway.”
The FOS report also shows that the total number of complaints was up by 30 per cent on last year, with a record 123,089 new complaints.
Chairman Sir Christopher Kelly says the FOS was hoping for an overall reduction in case numbers but the economic climate has led to a big rise. He says: “The sudden surges in banking and insurance disputes this year have meant that predicting, managing and dealing with complaint volumes has been more of a challenge for us organisa-tionally than ever before.”
Compliance consultant Adam Samuel is critical of the FOS for reducing staff numbers at a time when complaints are rising.
He says: “Some of the productivity excuses are a little hard to swallow against the background of a redundancy set-up that probably should be reversed until the service is back on an even keel.”
Milton says he believes that complaints have risen because new areas have been included in the FOS remit. He cites credit cards and payment protection insurance as examples and adds that it may be wrong to draw the conclusion that advisers are in a better position than before.
The FOS says over 95 per cent of businesses that fall under its umbrella received no complaints while six of the biggest financial services groups were involved in half of the total number of cases.
A spokesman says the companies will not be named at this point but adds that their anonymity is being reconsidered as part of Lord Hunt’s review of he ombudsman.
Milton says he does not think publishing the names of firms with the most complaints will be beneficial, as it may just reflect the number of clients they have. He says: “I hope the FSA is looking more closely at these companies and warning them that if they do not sort the situation out, it will do it for them. The threat of FSA action would probably be more effective than naming and shaming.”
Samuel believes the FSA should read the report carefully as part of improving relations and communications with the FOS, and adds: “It needs to take action against firms that mess up the FOS’s productivity by arguing the unarguable and generating some of the awful practices described here.”
Lakey is also urging the FSA to reconsider the advice market among non-IFAs rather than focusing so much attention on distribution through the retail distribution review. He says: “There is a compelling argument that the whole premise of the RDR is flawed. We obviously need to be looking at the advisory practices that are occurring outside of the IFA sector.”