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FOS chief ‘mystified’ by calls for simplified advice clarity

Financial Ombudsman Service interim chief executive Tony Boorman says he is “mystified” by industry claims that the FOS is holding back simplified advice.

Advisers have frequently cited a fear of unfair FOS decisions as the biggest barrier to developing simplified advice models. Last year, the Personal Finance Society called on the ombudsman to guarantee it would treat complaints about simplified advice differently from those about full advice.

But in an interview with Money Marketing, Boorman says it is “ridiculous” to suggest the FOS is preventing advisers from developing simplified advice models.

He says: “I have always been mystified by this. I do not think there is a fundamental issue here.

“The industry tends to ask us an absolute question – ‘Can you guarantee that simplified advice will always be fine?’ – which is very difficult to answer.

“What we can do is give the industry some assurance that as long as firms stick to the principles of acting with integrity, treating customers fairly and being clear, fair and not misleading, they will not go wrong.”

Boorman suggests the industry is wasting time arguing over the definition of simplified advice. 

He says: “We have always recognised there is a spectrum of advice. What is more important than any of this ‘angels on a pinhead’ debate is customers have a clear understanding of the risks of a simplified advice process.”

Boorman says the biggest potential problem with simplified advice is it is “only as good as the algorithm” it uses.

He says: “If by simplified advice what is meant is a structured set of questions that leads to a particular outcome, then over time there is a risk some firms will tilt the algorithm to give answers that are more commercially attractive.

“History tells us that is a risk regulators would be unwise to ignore.”

Thameside Financial Planning director Tom Kean says: “It may sound nice to be told to develop models in the way we think is best but that opens the door to complaints further down the line. We need further clarity from regulators.”


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Tony Boorman states, “What we can do is give the industry some assurance that as long as firms stick to the principles of acting with integrity, treating customers fairly and being clear, fair and not misleading, they will not go wrong.”

    This is so far from the reality that I and other advisers have experienced as to veer towards mendacious.

    I know of one adviser currently being told that his ‘execution only’ assistance to a client in 1989 is unsound and that he will have to spend substantial sums in redress calculations and compensation. He acted with honesty and integrity, unlike the complainant, and on a technicality (he selected the receiving insurer) he has been found guilty.

    Tony, advisers exist in fear of yet another hindsight review or some additional maniac thinking whereby unqualified adjudicators and ombudsmen sit in summary unchallengeable judgement based on opinion, hearsay and ignorance.

  2. Derek Bradley ceo Panacea Adviser 3rd July 2014 at 10:35 am

    In Virgil’s Aeneid, Book 2, 19 BC: “Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts.”

    The same thought was also recorded by Sophocles (496 – 406 BC), in Ajax:

    Nought from the Greeks towards me hath sped well.
    So now I find that ancient proverb true,
    Foes’ gifts are no gifts: profit bring they none.

    N’uff said squire.

  3. The simple answer is stay away from simplified advice!

    Those who want execution only can use t’internet themselves. Those who want advice can speak to an adviser.

    Those firms who want to make a profit from it must therefore accept the risk of being involved. If you don’t accept the risk, don’t do it and then you’ve nothing to worry about. You can’t have it all ways!

  4. What is the most disturbing about this is that the Chief Executive of the FOS doesn’t appreciate the problems. Perhaps he should read just a few of his own published complaint findings….

    It is like saying to a builder ‘use common sense’ with his construction work but then when something goes wrong, the Health and Safety system, with all of its hangers-oners, comes out to penalize the builder in view of all the risk assessments and directives he failed to document to the nth degree whilst using his common sense.

    ‘Simplified Advice’ still demands that the adviser is comfortable that the product advised is suitable for the client. He can only do that with a full fact find and risk analysis. Or, should I say that if an adviser ‘encourages’ someone to do something (whether with or without the analysis), then he is liable for any losses (and alternative returns elsewhere to) if later the client complains and declares ‘unsuitable for his risk profile’.

    Unless the FOS accepts that a client can sign something accepting responsibility for his choices based upon limited information both ways, what adviser can afford to take the risk of a complaint and the FOS saying ‘yes, I know the client said that’s what he wanted and decided to do and you advised him of all the risks in his decision and it appeared the correct decision to take…. but you should have known better Mr Adviser’. Yes, we have had just such an FOS judgement a few years ago. (And was it the same one which said ‘no-one over 55 should have equities’ or was that a different ‘judgement’? I can’t remember….

    Get real Mr Boorman – and recognise too that you head-up a ‘growth business’ with compromised interests of fat salaries, permanent rather than temporary lifestyle jobs, salaries linked to pensions and other very generous benefits and and organisation whose annual reports concentrate more on the growth of areas upon which you encourage complaints rather than plans for cutting the numbers of staff and ombudsmen (well over 200 already) as you expect investors to take more responsibility for the decisions they take within full disclosure regimes, as now operating.

    Call me cynical – or a realist too as many in the industry do and I suspect now there’ll be a black mark against my name on the wall at the FOS! (Fortunately buoyant markets seem to avoid complaints and we haven’t had any such for a very long time – funny that…!).

    Please issue your edicts upon which advisers can rely, Mr Boorman, if they plan to operate within the fuzzy definitions of ‘simplified advice’ or even ‘un/non-advised’ or ‘execution only’. (Or does the latter mean the guilty adviser will be taken out and shot perhaps….).

  5. Oh dear.

    This doesn’t look good.

    If they don’t even recognise that there is an issue what chance to we (or the FCA) have of making this work?

  6. I do find this article or should I say Mr Boorman’s comments very condescending, especially from some one who probably doesn’t have a clue about the advice process, and how to deliver it simplified or otherwise.
    He just stands on his pedestal spouting on about “what’s your problem I’m mystified” all you need to do is this that and the other !!!
    Bit like General Haig saying “all you need to do is cross 200 ft of ground and kill the hun”

    Simple really !! they forget unlike our Tommie’s we seem to have line of guns not only in front of us but behind us as well

  7. “FOS chief mystified by complaints that the FOS’ stance is vague and confusing issues vague and confusing statement”

    Saying that “the industry” (whoever he may be) asks “Can you guarantee that simplified advice will always be fine?”, and that this is difficult to answer, is a straw man. That’s not the question the industry is asking. The actual questions are:
    – Can simplified advisers use a simplified KYC process (e.g. an online form)?
    – Can consumers using simplified advice sign a waiver saying “The adviser will not be liable for losses that result from something I didn’t tell the adviser via the simplified KYC”?
    – Will the FOS accept such waivers as binding; and will they automatically reject all claims along the lines of “They asked me to fill out a risk questionnaire, but I had no idea what it meant”? Or “They should have told me to pay off my £10,000 debt on store cards before investing, even though I didn’t tell them about it because I didn’t know that counted as “liabilities”?

    These are very simple questions which Mr Boorman could easily give simple yes and no answers. I think we all know the answer is “no, no and no”. Until the FOS tells us otherwise.

  8. The issue would be whether or not what’s been provided to the client is clear enough – and on that, sadly, evidence shows that 10 years down the line, retrospective rules apply. I’d be very wary about simplified advice.

    Although in the example Alan quoted above for execution only, it can’t be execution only if the IFA selected the insurer. He might have been simply trying to do the client a favour, but that sort of example shows how you’ve got to stick to being very clear about what you’re doing.

  9. Dick Sprinkler 3rd July 2014 at 11:55 am

    Oh that’s alright then Mr Boorman you have put my mind at rest !!!!!!

  10. As someone else mentioned, Mr Boorman really does need to furnish himself with the facts of some of the FOS investigations and conclusions. For example, FOS seem to feel that advice based on whole portfolio doesn’t stand, they look at “products” in isolation, so if a client is low to med risk but has a small amount in higher risk funds but a large amount in lower risk, FOS will only consider that the higher risk funds aren’t within the clients attitude to risk – all contrary to FCA guidance and line of thinking. Again, as someone has mentioned their attitude to EO is unbelievable, even with 4 letters on file from a client (2 of which were handwritten) FOS felt due to the amount of commission taken it couldn’t have been EO and upheld the complaint! (this was a few years ago and commission taken was 3% – when it could have been 7%). Their view was that EO would only result in a negligible charge (ironically the cost of PI cover because of FOS warrants a reasonable charge). Either way we have no recourse and it’s not worth the risk, I totally understand why advisers are so nervous and Tony Boorman needs to do some digging and some homework before saying he doesn’t understand.

  11. With comments like this – words fail me. Anyone who gets involved with simplified advice needs their head examining ….

  12. I think this highlights the problems very well.

    The risk for us to develop ant simplified advice model remains to high, its full advice or nothing, we will not transact execution only business either.

    I also think the FCA starting with a statement “be afraid, very afraid”, does not help.

    No business person should start any business venture without knowing the rules and there is the problem, we don’t have any. Guidance is not worth the paper its written on, as the meaning can be changed when situations dictate.

    I do believe strongly in regulation, it is a good think, but until they listen to those at the coal face the death of your industry will continue. At some pint we have to reach agreed rules or signed off by the regulator offerings. It is the only way for us to have certainty.

  13. So that’s where Andy Murray’s tennis racquet got to!

  14. Julian Stevens 3rd July 2014 at 1:17 pm

    In addition to this, we hear of the FOS finding against firms for having provided clients with more information than an ordinary lay person could reasonably have been expected to have comprehended.

    So we’re damned if:-

    1. we do everything the FCA’s rules/guidance dictate (as far as we’re able to interpret them),

    2. damned if we try to slim things down a bit (to make the advice process a bit easier for the client to understand),

    3. we’ll be damned if we use a “tilted alogorithm” for simplified advice and

    4. damned as a consequence of the FCA’s ongoing practice of reviewing things by hindsight according to whatever slant it feels like putting on its past guidance umpteen years down the line.

    Rocks and hard places spring to mind.

  15. Exasperated Me 3rd July 2014 at 2:01 pm

    The compensation machine will simply grind you down whatever you call the advice you gave because consumers mustn’t lose money.

  16. I have been working on a case where the adjudicator claims that it was suitable to let a cautious investor to try to time the markets.

    It does seem to be heads the consumer wins, tails the adviser loses.

  17. A clear illustration that the FoS has no idea what it’s impact on the advice market is.

  18. ‘History tells us that is a risk regulators would be unwise to ignore’

    Mr Boorman, you are aware there are REGULATORS and that they set the rules. The FOS is NOT a regulator and yet everyone is concerned about the RULES you will set? and you dont think there is a problem?

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