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FOS must not make hasty decisions

The Financial Omb-udsman Service is to extend its timescale for introducing a new funding regime. This delay strikes me as bad news for the industry and I hope the FOS will take every opportunity to reconsider.

IFAs tend to have a good track record with the FOS. We account for only around 14 per cent of complaints and, of these, over 70 per cent go in the firm’s favour.

We welcomed the fact that the FOS took our views seriously and embarked on a funding review. Its discussion paper was mainly positive, with sensible options for a better funding regime discussed. It is no secret that we opted for a system that should basically deliver an Ombudsman scheme that would be free to almost every IFA firm when looked at from a case-fee position.

Further, the end of a higher special case fee of 475 would see a particular cause of concern eliminated.

More important, the move away from a levy based on the number of FSA permissions held by a firm and to a single firm fee recognised the value of holistic financial advice and was a huge step forward. In my view, the current system penalises IFA firms which want to offer holistic planning as they must pay an FOS levy for activities where their business levels may be negligible.

We would also like to see networks and other big firms have the ability to buy a block number of cases in advance, so recognising the particular needs of the biggest businesses in our market.

All these points were made in our response to the discussion paper and are focused on improving the way that the FOS is funded. However, that only tells part of the story. Funding and operations go hand in hand and cannot be unbundled. What you do with the money is at least as important as how you raise it.

That is why our response to the FOS also called for wider issues to be addressed. We recommended that the FOS create a specific and high-profile small firms division, a parallel of the FSA’s team with the task of handling the special demands of smaller businesses. This team, with an individual heading it, would be responsible for handling the complaints made against IFA firms and others that, by their nature, tend to attract more complex disputes.

This system would ideally suit firms which get fewest complaints, where they are not experienced in the intricacies of the FOS system and where, most importantly, they are not looking for a “plea-bargaining” result but want to test the veracity of the complaint.

The system would also see personal oral hearings conducted on a far more regular basis.

It could easily be argued that this system does not conspire to produce swift resolutions, does not sit easily with slick process and may even lead to some delay. I fully accept this may be the case but would argue that these are secondary issues.

It is important that any change is given due time for consideration and that the industry’s preparedness for change should be factored into the decision-making process.

However, I feel that I must urge them to proceed with all due haste. These are issues that firms feel strongly about. There is never a perfect time to change and the perfect must never become the enemy of the good.

Chris Cummings is Aifa director general

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