The recent complaints figures from the Financial Ombudsman’s Service made depressing reading for the financial services industry and the general levels of trust that consumers have in businesses that look after their savings, pensions and investments.
In total, The FOS received more than 2 million enquiries over the course of the financial year for 2012/13 and 508,881 new complaints were lodged with the service, an increase of 92 per cent on the previous year.
Although 74 per cent of complaints relate to the sale of PPI, the volume of complaints across the industry does not paint a good impression amongst the general public and complaints about investments and non-PPI insurance were also up significantly on the previous year, with increases of 33 per cent and 20 per cent respectively.
The big four banks were responsible for 62 per cent of complaints, up from 52 per cent in 2011/12 and while many of these complaints will also be for PPI, they also cover banking, savings, mortgages, pensions and investments.
Of the total number of complaints to the FOS, 49 per cent resulted in compensation being paid to the complainant.
The picture for financial advisers is better but IFAs have also seen complaints against them increase sharply.
Out of the complaints about named businesses, less than 1 per cent of complaints were against IFAs, but the number of complaints has increased by 45 per cent over the previous 12 months – however, these figures exclude businesses which have recieved less than 30 complaints each and so auto-matically exclude a large number of IFA firms.
The Personal Finance Society has been keen to point out that IFAs compare very well with the rest of the financial services industry and they should be keen to point this out to the general public and the regulators.
The percentage of claims against IFAs upheld drop from 54 per cent in 2011/12 to 42 per cent last year and PFS chief executive Keith Richards says: “Despite the growing litigious culture and emergence of claims management companies, this data from FOS is positive supporting evidence that the advice profession deserves recognition for higher levels of professionalism, expertise and trust than might have been the case in the past.”
The PFS also points out that the experience of the FOS is shared by other organisations such as the Citizen’s Advice Bureau. Last year, the CAB received more than 7 million enquiries but only 3,079 of these enquiries related to financial advisers, brokers or intermediaries. In addition, these areas of financial services accounted for less than 3 per cent of all the enquiries the organisation received about financial services.
With the higher standards needed to operate as a financial adviser now in place and easily evidenced thanks to the RDR, there is a real opportunity to push the message about the quality of service offered by financial advisers.
Richards says: “If is fair to acknowledge that regulation has been effective in supporting these improvements, however it is equally important to recognise the commitment of the financial planning profession who evidently deliver a service which is trusted and valued by the majority.
“Coupled with the implementation of RDR professionalism and transparency rules, evidence supports a call to create stability and allow the development of a vibrant professional advice sector, which the public needs and deserves.”
The value of the advice for clients who have engaged with financial advice can be dramatic. Research carried out by unbiased.co.uk last year in a report called The value of advice showed that more than half of people who receive financial advice have life insurance compared with just 35 per cent for non-advised, while 39 per cent of people who take financial advice have a personal pension compared with 21 per cent of those who have not received advice.
More importantly, people who get financial advice tend to save for longer and pay more into their pensions and investment than those without advice.
Unbiased’s research found that pension saver who take advice could be as much as £232 a month better off in retirement if they took advice compared to those who do not.
Standard Life head of retail marketing Dave McGovern said: “It is vital for the industry to be making a case for people to be seeking advice.
“Life other forms of professional advice, such as from solicitors and accountants, we need to clearly demonstrate that while there is a cost for the service financial advisers provide, it is one well worth paying for.”