View more on these topics

FCA: Differences between regulator and FOS are a myth

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.”



Spin, half-truths and omissions: David Cameron talks pensions

As part of a Government push to promote pension reforms, Prime Minister David Cameron has today written for It is quite a coup for Martin Lewis and his team and an article that any media outlet would have published, including us. The only problem: it’s nonsense. It’s riddled with spin, half-truths and omissions. Cameron […]


Savers face tax self-assessment headache under new pension freedoms

Tens of thousand of savers face paying unexpected tax bills and HMRC fines because they do not understand the rules around pension freedoms next year, new research shows. Annuity provider MGM Advantage warns thousands could be pushed into the higher tax band and face self-assessments for the first time without understanding the rules. The average […]


Towergate reveals takeover approach

Towergate Insurance has appointed Evercore and Rothschild as joint advisers after being approached about a possible takeover. The firm floated the possibility of a sale in a short statement accompanying its interim management statement. The identity of the bidders and the potential timescale of any sale process have not been disclosed. Towergate executive chairman Alastair […]


News and expert analysis straight to your inbox

Sign up


There are 21 comments at the moment, we would love to hear your opinion too.

  1. E L Wisty (an only twin) 17th November 2014 at 2:48 pm

    Mr Percival is an amiable, well-meaning individual in many ways. However, his recent comments are either bordering on disingenuous or naïve – and, in view of his undoubted intellect and experience, I doubt it is the latter.

    For example, his illustration of a perfect suitability letter is utopian – in that it will never exist in reality. If we opt for succinct, client friendly letters – we will be criticised for omitting important detail. And, if we include everything, then the regulator will accuse us of over-burdening the client and obfuscating the issue.

    I sometimes think that our relationship with the regulator is akin to a casino that has a monopoly over all bets – heads they win, tails we lose ……..

  2. I have a lot of time too for Rory and have met him when he visited our firm and carried out a thematic review, I found him helpful and fair, however, I have to disagree with comments re FCA and FOS. FOS do take a different approach, I’ve been dealing with complaints and FOS for over 15 years and I can categorically say they don’t always take into account FCA views or rules. For example, many firms take a whole of portfolio approach unfortunately FOS don’t, if a client complains that the fund was too high a risk for them, FOS will disregard the fact that only, say, 5% was in the fund and 95% in cash to make for a “lower risk portfolio” and will look at the 5% in isolation. This is only one example, there are more. I fully appreciate it may only be a small proportion of complaints, however, this is enough for advisers and their insurers to apply a belt and braces approach. We and our insurers also have to consider FSCS, just look at Keydata, the fact that some advisers may only have advised clients with a high attitude to risk to invest just 3% of their overall portfolio into these investments and keeping the overall portfolio within the clients required parameters has fallen on deaf ears – FSCS instructed lawyers and made claims without even looking at the files. At least with the Arch Cru problem, the FSA did permit reviews of individual files, but it still results in advisers taking the approach they do.

  3. I sense a distinct closing of ranks between the FCA and FOS in these comments by RP (and other recent articles) !

    It does make me wonder if something’s a foot ?

    As for the rest of his ramblings on Suitability Reports; (sorry cant think of anything constructive or positive to say, other than if Rory thinks its that simple then it must be !!)

  4. The perception that the Financial Ombudsman Service makes decisions which go against FCA rules is a “myth.
    Is that like a Greek myth then? everybody knows them, nobody believes them.
    Not saying we don’t believe either the FOS or the FCA, but the one myth that does seem to be true is that they do not speak the same language, Greeks and Romans anyone?

  5. There is a dead easy way to test the “suitability letter” issue and the FOS v FCA debate

    We create a client advice file for something sufficiently complex and testing (at retirement options and investments for example). The file contains full details including client meeting notes, research and illustrations and key features documents

    We then sit some people down in a room, say a couple of IFAs, someone from the regulator (Rory?), someone from FOS and say, a compliance consultant and everyone writes up a suitability letter/report.

    We then discuss and debate the contents of said suitability reports and get a consensus on what constitutes an acceptable format to advisers, FCA and FOS

    Come on Money Marketing you could facilitate this for us

    Any volunteers?

  6. I agree with Wisty and Gaynor above re Rory – One slight correction for Gaynor however is that with Keydata FSCS did look at files first, but ignored any argument over % allocation to a client portfolio with both Keydata and Arch (we had no Arch cases, but I know an adviser who had les than 2% in a client portfolio and got caught up as a result in the drag net)
    Prior to FSMA 2000, all FSA discussion papers said the rules on time bars would be drafted in accordance with common law (i.e. 6 years, 3 years and a 15 year longstop) and yet the rules were drafted omitting the longstop (it is implied because a case was yet to be decided on appeal which may have removed the longstop in common law too, but after appeal, precedent of the longstop was re-established), the FSMA rules however were left without out and F-pack have refused to re-insert ever since.
    Not withstanding that, FOS routinely ignore the 6 and 3 year rules and cases are looked at well passed this time (there have been reports on here of cases being found in favour of a consumer more than 25 years after the original advice and more than 3 years after the consumer should reasonably been aware of a potential loss, i.e. after encahsing an investment and then complaining).
    As I have said before on this site, I have read quite a lot of FOS decisions since they started publishing them and the VASTE MAJORITY I agree with, BUT the issue of timebars and longstop is a fundamental issue of common law and it’s removal from the rulebook was a serious abuse of power and the obfuscation of Rory and his peers at the FOS on this issue is one I cannot defend him on, despite the fact I would prefer him to remain at the FCA as one of the good guys who is trying even if he doesn’t always get it right.
    The problem for advisers, is we only need to be accused of getting it right ONCE and we are out of a business, whether we would be held accou8ntable in law or not is immaterial with the FOS system, particularly when the longstop is ignored and F – pack refuse to meaningfully engage on it (I am on |APFAs Longstop working party and we appear to be going round in circles, despite martin Wheatley’s public commitment at the Chatham CCL seminars he hosted when I pointed out that they had effectively removed anyone with a CCL licences longstop without any consultation by taking over from the OFT!

  7. As suggested above, I think Rory is being slightly disingenuous here.

    When we’re talking about individual client circumstances and principle-based regulation, it is very difficult to demonstrate tangible inconsistencies.

    Relating to suitability reports specifically, the key issue with FOS is that the absence of information in the report leaves the question of whether it was covered open to the interpretation of the FOS adjudicator or Ombudsman. This lends itself to detail-heavy suitability reports, as the omission of a particular point from the report involves taking the risk that FOS conclude that the discussion did not take place.

    It is easy to dismiss this as a perception problem, but when firms see FOS rulings for similar scenarios where the absence of information appeared to be a crucial factor leading to an upheld complaint, it is understandable that firms will seek to reduce the risk of this happening to them.

    The FCA typically categorise client files as either Suitable, Unsuitable or Unclear. With FOS, a complaint is (essentially) either upheld or it isn’t. During seminars the FCA have highlighted that there is a high risk that Unclear cases will lead to upheld complaints.

    The wider issue that the FCA seem unwilling to tackle is that too much emphasis is given to the quality of the report, rather than the quality of the advice.

  8. I agree with Nick on this.

    My compliance manager always used to say, the report should cover 3 things,;
    Why the product
    Why the Company
    and why the fund

    Other things have since been added by the F-pack, hence the report has got longer, then compliance consultants and PI companies have added their bit, then we have the firms who like to repeat what the Key Features Document says and so on and by the time we are finished we’re back to issuing a 40 page document which ahs NO chance of being read by the consumer until or unless something goes wrong!

    A 4 page SR with a detailed brochure or booklet and appendices has GOT to be the way forward.

  9. On the issue of whether it was covered in the report or covered in the meeting I often remember when my then employer started making use of laptops to do the client fact find and input ALL data while in the meeting. We went through 2 weeks training with no trainer actually having a go. They then said they wanted volunteers to do the roleplays based on the compliance requirements, so I volunteered to be videoed and the interesting thing was as someone who CAN do it by the book, is in doing so, it showed just how long it takes to do everything by the book and NO consumer would ever be willing to sit in front of you for that long, so something is invariably not covered which may prove to be pertinent later,
    If it takes weeks, months or even years for an adviser to qualify (i.e. learn everything which is appropriate) how can an adviser explain everything to a client in the course of 2 or 3 meetings?

  10. Derek Bradley ceo Panacea Adviser 17th November 2014 at 3:51 pm

    From the 7th July to 12th August this year, we conducted a survey amongst financial advisers asking them for their experiences of the Financial Ombudsman Service, its perceived fairness and how the overall complaint system could be amended in order to deliver greater efficiencies and fairness.

    The survey received 183 individual respondents as well as a host of comments on each individual question, which meant the final survey report runs to 28 pages, showing the depth of feeling amongst the adviser community. We have provided a selection of comments with each question below to give a flavour of adviser sentiment on this topic.

    Panacea has shared a copy of the results with Caroline Wayman, the new FOS boss, Mark Garnier MP, Andrew Tyrie MP, Martin Wheatley, Keith Richards (not that Keef) Chris Hannant and Otto Thoreson.

    As a comparison we have also included the result summary of the 2011 FOS survey – most of the questions were asked in both iterations of the survey; be aware that no ‘Unsure’ option was offered in 2011, it was for 2014.

    The 2011 survey, a pre-RDR, pre-FCA period, showed that something was seriously wrong with a system that was meant to be fair, open and honest, and where complaints that firms could not resolve were considered in an unbiased fashion based upon the evidence available and/or the balance of probability.

    The time seemed right to revisit this survey as we now have a re-branded, re-managed regulator in place and a new boss at the FOS since Ms Ceeney resigned in November 2013 to join HSBC as head of its customer services.

    The hoped for outcome of this exercise is that there is a recognition by both regulators and politicians that all is still not as well as it should be at the FOS and that something must be done to restore confidence in a system that so many see as wrong. And that view, we are sure, is not limited to the adviser community in isolation or just to do with the lack of longstop protection.

    Consumers absolutely have rights that should be strongly protected, but in doing so the adviser consensus seems to be that those rights would appear to be taking precedent over everything else. Even, very worryingly it seems, to the point that if a consumer complaint is not possible to uphold on the basis of evidence available and/or probability, another way is found. And in some cases, if this survey’s anecdotal evidence is to be believed, this means the FOS re-engineering a complaint to create a successful one that the client did not make in the first place or had any issue with.

    Confidence in a fair and unbiased Ombudsman service is vital and the right of all who use or engage with the service, the complainant and those complained about.

    There is much concern both inside and outside the industry about the restoration of consumer trust and we agree that much still needs to be done.

    We hope the positives can be taken from this survey may cause a pause for thought because right now many in the advisory community see that very little has changed since 2011 and part of that restoration of trust is to ensure that the ombudsman service is seen as as a neutral body and not an arm of the regulator that champions the consumer at all cost.

    A particularly disturbing trend was the increase to the already large 2011 percentage (64%) of firms who had experienced false or manufactured accusations from complainants in an attempt to gain compensation?

    This year that stands at 74%.

    Here is a link to the full survey results-

  11. “A particularly disturbing trend was the increase to the already large 2011 percentage (64%) of firms who had experienced false or manufactured accusations from complainants in an attempt to gain compensation?

    This year that stands at 74%”

    The even more disturbing trend is that the powers that be do not seem to take into account of the unintended consequences of the current system. People are getting wise to how the deck is stacked with regulatory complaints. I have had unprompted discussions with people outside the industry who have said things along the lines of “It’s worth trying it on (with FOS) because it’s free and they get charged for every case anyway”. These are not industry secrets – plenty of people are aware of how the system works and will inevitably be using it to their advantage.

    I don’t want to turn this into a long anti-FOS rant, but at present it is far too easy to make a spurious complaint, which can be in turn far too difficult to defend without a very robust client file. Cases can be brought to FOS with little to support them other than anecdotal claims. As the Panacea survey suggests, these claims can be manufactured or false.

    The other major flaw is that even the most spurious of claims can go through three separate assessments (Regulated Firm, Adjudicator, Ombudsman), at considerable cost to the firm, and at no cost to the complainant. I’ve seen complaints such as one where the customer wanted to “cash in” her annuity, which the provider didn’t allow her to do (as they have no obligation to do so). There was no greater substance to the complaint than this, and yet still it went as far as the Ombudsman. In a legal setting, a claim with no legal substances would get laughed out of court.

    The system needs an overhaul from top to bottom. Keeping an open mind though, it will be interesting to see what the FCA have planned as a means to “do something” about the perception of FOS.

  12. I’ll tell you what’s a myth…sorry, amiss! Meat on the bone of his comments!

  13. What the same type of myth like commission bias that proved to be perception rather than fact?

  14. headbelowthe parapet 17th November 2014 at 6:35 pm

    The highly respected Gill Cardy (by me anyway) recently wrote in her FT column that:

    “Ombudsman adjudications are more important in practice than any other assessment of the suitability of our advice”

    Perhaps Mr Percival should read her open letter to Caroline Wayman:

    Mr Percival just might be the very person to orchestrate such a meeting of minds and finally address this issue (and be a minor hero to boot!).

    Gill suggests “that Fos, the FCA and the professional bodies agree common standards by which advice is to be judged when a case is referred to [the Fos] offices, so that each and every one of us is working to a common understanding of good quality professional advice.”

    (Not unlike the suggestion made by Nick Bamford above)

    Both ideas seem very sensible to me, but I guess we shouldn’t hold our breath…

  15. In light of my own experiences with some (not all) adjudicators at the FOS, I really can’t be bothered to comment on this, other than to dispute it.

    (Touch wood) I don’t get any complaints (though, on behalf of clients, I’ve submitted a few to the FOS, with varying degrees of success). The proof of the pudding is in the eating.

  16. Adrian P Hudson confirmed and his Chairman confirmed that we had to ” Refund ” I.E pay a client ” Commissions”, which are in Breach of Law. This in top of the discounts the client received, – who then went direct through a wrap platform and continued to use the discretionary fund manager ? There is no protection for advisers against fraudulent people whether as clients or Bank Directors – both seem to get await with cheating – FRAUD and corruption – without any interruption form Mr Wheatley’s FCA. I see Hector Sants is now operating under the Church . . .although as an ex banker he will not be asking for penance – merely protection from his time as Head Honcho and Government regulator the FSA – prior to their SCAM of . . . ” drawing a line under the corrupted ” . . .. before the name change to FCA ? who continue to fail. Perhaps they could take a lesson from the Bible and St Mathew Patron Saint of Finance . . .who confirms those caught ” on the fiddle “, or ” being inept ” or ” gross misconduct “, – should repay FOUR times the amount they fiddled – to the VICTIMS ( whether out of company funds which would make shareholders more interested – or personal salaries and bonuses – such a change in Compliance would make the Directors ( ” the Barrels ” as Mr Carney has nominated them – fat round and wooden – and cannot hold their liquor )

  17. E L Wisty (an only twin) 18th November 2014 at 9:07 am

    Of course, there is an exception to most people’s concerns in respect of FCA/FOS differences.

    CF Arch cru; where the regulator used its statutory powers to restrict the FOS’ ability to investigate and award compensation against Capita, over or above the FSA’s self-determined Payment Scheme.

    I don’t recall hearing a single murmur of disapproval from the FOS at that time.

  18. The FCA keep telling us they are NOT a retrospective regulator !

    Then we get details of fines on Chase based on poor controls at the time (back to 2005) and yes suitability reports this is not the only case there are of course many more cases of fines, enforcement and S116’s from retrospective regulation.

    These in the main, are based on what we were doing 5, 10 15 20 years ago, so in fairness what we are doing today will be out of date 5, 10, 15 20 years in the future (we cant win)

    Are industry moves at such a pace, and IFA’s a very quick to adapt but that in itself might be self defeating.

    We have unlimited time liability regards longstop, so we know if we are being judged at some point in the future, something will not sit right with FOS and or the FCA (if they are still around) ! so in that respect they are aligned !

    I don’t know about you, but I try to make my suitability reports good from the present and future, but its like taking your car for a MOT it may pass now but 6mths down the line it will fail on something ! its hard not to make them lengthy, I suffer from paranoia every time I write one and that is not of my own making Mr Percival.

  19. This is a comment from a regulator that is still product focussed. Part of me could not be bothered to respond but drawdown is a very good example of why a suitability letter is so long. If you give drawdown advice you will discuss with the client other alternatives such as third way annuities, conventional annuities and indeed lifestyle options like working longer etc. The suitability letter in detailing the disadvantages of drawdown has to refer to those other options where that disadvantage could be overcome. It then becomes very complex but you are demonstrating to the FOS in 10 years time that you have considered all possibilities. You are not dealing with a product recommendation but advice.
    If the product is not right the FOS will hang you out to dry because the advice was wrong. Drawdown can meet a client’s objectives, it can (possibly) be suitable and you can point out the disadvantages but the product has to be put into context not only with the client’s objectives but the different ways of achieving those objectives.

  20. @Sam Caunt – I agree with you. Bearing in mind most clients loose the will to live when reading a report which is more than 4 sides of A4, I came to the conclusion that what the client is more interested (and they pay ME not the FOS) in as what I SAY and hence we record the meeting, me explaining annuities v drawdown v third way, which I do whether we finally recommend drawdown or annuity. I have NO preconceptions when talking to a potential client, nor to a transactional person who come sin with under £30k (potential for triviality, but often turns out other pensions have already been crystallised)
    By recording the meeting I can demonstrate INTENT and that there was a serious attempt to be clear, fair and NOT misleading. SA written report is assumed to cover ones backside wheras in reality the only complaint we have had to defend didn’t even get as far as the FOS as the recording showed that not only the report said x, but the adviser said e too, with the emphasis and inflection of voice of both the adviser AND the consumer.

  21. Manufactured Complaints – would fit well with ” Manufactured replies ” from Adrian P Hudson and his play mates, the FinanciL Ombudsman / Woman and colleagues at the FOS right up to the Charirman Sir Nicholas Montague who claims he ” has NO CONTROL OVER OMBUDSMEN OR WOMEN ” as Chairman ? I think I can see where we can save Tax Payers Money being wasted . . . .remove the chair !

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm