The Financial Advice Market Review in 2016 was supposed to kill off the debate about whether advisers should have unlimited liability for complaints at the Financial Ombudsman Service.
The data just did not warrant putting a formal time limit on complaints, the FCA ruled. Too few complaints actually dated back to more than 15 years ago. Very few of those were successful and that minority was centred on issues like mortgage endowments, which are dwindling with time anyway, and on which there is pretty much unanimous agreement that there was widespread misselling that merits compensation.
Regardless, the FOS’s rules clearly stipulate that consumers are time-barred if they bring their case more than three years after they could have reasonably known they would have had a cause for a complaint, or six years after the event itself.
But a whole host of developments means the longstop is a debate worth revisiting today. Firstly, advisers are worried that defined benefit transfer complaints could fill the hole left by mortgage endowment redress. Professional indemnity insurers are coming under more pressure. Margins for advice firms, and therefore reserves to pay potential FOS bills, have ticked down (albeit only very slightly). The new adviser trade body, Pimfa, may not be as dedicated to the cause as its predecessors, Apfa. The FOS recently underwent its own review of internal processes after a Channel 4 documentary made allegations of sloppy decision making.
Earlier this month, the FCA turned the pressure up by announcing plans to increase the maximum payouts the FOS could award, as well as to extend access to small and medium-sized businesses.
Does this finally tip the scales in favour of introducing a formal time limit on complaints?
It’s not just something that angers small advisers. Zurich put its weight behind the Fair Liability 4 Advice campaign with early financial planning trade body Aifa. Major networks like Intrinsic, Tenet and Lighthouse all lent their support to it too.
This support has fizzled out. But the argument the profession can continue to play, whatever the merits of the longstop, is that trust in financial advice, and the need to recruit new blood, is more important than ever.
It is not strictly speaking true, but the perception for entrants to the profession that they could be on the hook for complaints for an indeterminate amount of time is probably not the greatest advertisement to become a financial planner.
Even if the FCA won’t overturn the decision and introduce a longstop, we should at least raise awareness of exactly when consumers will be barred from going to the FOS, and enforce those timeframes diligently.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1