Figure out the FOS


I started writing this column before finding that fellow columnist Nic Cicutti had also touched on the fact that the Financial Ombudsman Service recently published its annual report. Nonetheless, I have a number of observations which act as a counterpoint to Nic’s melodious views.

Advisers have little sympathy with the FOS because it is believed that they are under political pressure to uphold complaints in order to provide consumer confidence.

Surely it must be thus, otherwise the alternative is that they are poorly trained, exhibit minimal knowledge, have scant industry experience and, frankly, some of the time, do not know what they are doing. Some of their recent adjudications have been ludicrous with thought processes and logic reminiscent of primary schoolchildren.

It is educational and revealing to view the figures. Figures which, incidentally, Mark Hoban took issue with at a meeting last year when he railed against the inclusion of complaints concerning bank charges.

Payment protection insurance is the new endowment and accounted for 30 per cent of all complaints, 89 per cent of which were upheld. Banks provided 70 per cent of PPI complaints, with mortgage and insurance intermediaries a further 22 per cent.

Just under 11.5 per cent of complaints concerned investments. IFAs were responsible for 12 per cent of these, banks and building societies 38 per cent and product providers 45 per cent. Uphold rates varied with 49 per cent for portfolio management, 45 per cent for investments bonds, 38 per cent for mortgage endowments and 26 per cent for whole of life and savings endowments which, inexplicably, have been combined. Dare I ask whether the FOS believes that a whole of life plan constitutes a savings vehicle?

When we look closer at the upheld complaint figures, we see that not surprisingly banks top the league with 52 per cent compared with 39 per cent for IFAs. Can you see a trend here?

Detractors will be swift to point out that advisers look better because the banks have fielded the majority of PPI complaints but that is exactly the point. Not only do IFAs have lower numbers of complaints and lower percentages upheld, but one of the prime reasons is that they avoided recommending this clearly toxic product because of due diligence and the fact that they are not targeted to sell such things.

It is encouraging to see critical-illness and income protection plans only notching up 0.85 per cent of complaints. This is something of a vindication for those who argued against the inclusion of protection within the RDR devastation…err, I mean proposals.

Nic highlighted the 108 complaints received by Sesame during the first six month of this year. To my mind, this figure looks quite impressive, given their large number of ARs and seems to be a vindication of their compliance processes.

Contrast this with the 1,254 received by Aviva under its four guises and the 7,991 against Barclays Bank, 516 of which related to investments and pensions.

Yet again, the FOS figures provide the realisation that despite having the lion’s share of the investment and pension market, IFAs receive far fewer complaints and even fewer that are escalated to the FOS.

Is this down to better product selection, better administration or better client management? All three, I would say.

Alan Lakey is partner at Highclere Financial Services