The perception that the Financial Ombudsman Service makes decisions which go against FCA rules is a “myth”, says FCA technical specialist Rory Percival.
Speaking at an Institute of Chartered Accountants of England and Wales conference in London today, Percival said the issue of differences between the FCA and the FOS is often raised with the regulator.
But he said: “I am not convinced that the incidence of these differences is as significant as is often made out.
“When I talk to people about cases that have supported that view, actually the difference isn’t necessarily there. I think messages can get round from one person to another and people can interpret adjudications in particular circumstances to take a wider view.
“There is the potential for the myth to have been built up and I am unconvinced that this is as much an issue in reality as it is in perception.”
He added: “The problem is that perception becomes reality, so there is a need to do something about that. I’m not in a position to say what that is, but it is something we are conscious of.”
Percival also said that shorter and more personalised suitability letters could help advisers defend complaints to the FOS.
Earlier this month, Percival said suitability letters were too long and geared towards defending complaints rather than client engagement.
He said many advisers have since said they need to include all the information they do because of the FOS.
But he said: “If your letter is clearly personalised to the individual client, that is going to be contemporaneous and personal information that the adjudicator will look at. A lot of adjudicators are getting reports that are generic, however, and in those situations it is easier for them to come down on the side of the client.”
Percival told delegates that, with the exception of more complex areas like drawdown and occupational transfers, there are only three things that need to be included in a suitability report: the client’s objectives, why the recommendation is suitable and what are the potential disadvantages.
On adviser due diligence, the subject of a current FCA thematic review, Percival said the regulator sees instances of retrospective due diligence.
He said: “One of the things we sometimes see with firms is what I refer to as ‘retro fitting’ the selection of a product or service to a client. This is where the firm has already decided to use a particular product or discretionary manager and they decide to carry out due diligence to justify the decision they have already made.
“That sounds like a tick box approach which is something we are not keen on these days. We expect firms to take a step back and take an impartial look at what is best for their clients.”