Financial Ombudsman Service chief executive Natalie Ceeney says forcing adjudicators to gain financial qualifications would lead to a quadrupling of case fees.
In an interview with Money Marketing, Ceeney says the FOS wants to “bust adviser myths” about the way way the ombudsman is run but rejects calls from advisers for FOS staff to gain financial qualifications and for claims firms to pay refundable fees for cases they bring to the FOS.
She says staff receive training in certain products but can’t be expected to have financial qualifications alongside judging skills. Ombudsmen have average salaries of between £60,000 to £80,000. Adjudicators start on £22,000 and they are typically paid £30,000 to £35,000.
Ceeney was paid £256,064 in 2012/13, an 8 per cent increase on the previous year.
She says: “We are not giving financial advice, we are judging. Judges are lawyers and not financial experts because that is the skill set.
“There is also utterly no way on earth I could hire 1,000 staff with financial qualifications this year on the salaries I’m paying, zero chance. If the industry wanted all my staff to be as qualified as ombudsmen the case wouldn’t be £550 it would be £2,000 so I have to be a responsible steward of industry money.”
Ceeney says advisers amount for less than 1 per cent of its total case load and the uphold rate fell to 42 per cent in 2012 from 54 per cent the previous year.
The FOS has increased the number of free cases per firm from three to 25 in April to help small businesses. Network members will see little benefit from the increase as the free cases are split across the organisation.
Ceeney says the reforms mean 99 per cent of IFAs will now not pay case fees.
But she dismisses further suggested reform which would see case fees returned to firms who have the case against them rejected due to concerns this would impact on FOS impartiality.
She says: “Refunding case fees would not work for our business model but more importantly it would provide an incentive to find in favour of one side. I never, ever want an incentive to find one way or the other as it would lead people to question our independence.”
Ceeney also rejects the possibility of making claims firms pay case fees when complaints are not upheld in a bid to deter them.
She says: “It would not change claims firms’ behaviour at all as they would simply pass fees on to vulnerable consumers. I also have no power in law to do it so I can’t do it and I don’t think it is the right answer.”
FOS complaints about advisers mostly revolve around unregulated collective investment schemes and the suitability of investment products.
Ceeney says: “Most advisers only get one complaint in a blue moon so most issues are around the fear of what might happen if they get a complaint rather than the reality.
“Most complaints are investment-related and a lot are brought by other advisers. There is a dynamic where a consumer moves advisers and the new one says ‘you should never have had that’.”
Ceeney says adviser complaints become “very emotional”, more so than banks or insurance companies, because there often a long history and relationship between client and IFA.
She says: “The relationship between client and adviser is long-term and they know them well so if a client moves to another adviser and then complains about the first one it can feel very personal.
“We are conscious it is not just about what is written in the complaint, there is also quite a lot of emotion on all sides tied up. It can make adviser complaints quite challenging to resolve because everyone has fixed views.”
Last month the FOS unveiled its new website to publish its decisions in full as outlined under the Financial Services Act 2012.
Ceeney believes the new service can be useful for dispelling myths and encourages advisers to use it to see how FOS operates.
She says: “If you are an adviser only getting one or two complaints in a 10 year period understanding how the ombudsman works is quite important. We think it will help because there are an awful lot of myths out there.”
One area where Ceeney believes myths have developed is around Keydata complaints against advisers. Last week Money Marketing published details of eight Keydata complaints upheld by FOS against advisers in May but Ceeney says the FOS does not make blanket decisions on such issues.
She says: “There is often a myth that we are product specific so if someone has Keydata they will lose but we categorically do not do this. She says a number of Kyydata complaints brought to the FOS have been dismissed.
“Complaints about advisers come down to whether the consumer’s circumstances meant it was suitable investment to advise on, even if advisers didn’t know something horrible was going to happen.”
Ceeney says claims firms should be better regulated but suggests that if the financial services industry was better at dealing with complaints there would be much less need for them.
Dealing with PPI has become the FOS’s main task, with 2,000 complaints received every day and up to a two-year backlog of cases.
To keep up with demand, it hired 800 staff in the last financial year, with 1,000 more set to join between April and the end of the year, swelling the organisation to more than 4,000 staff.
PPI misselling: “It’s the biggest misselling scandal in British history”
Claims management firms: “You don’t need them and they are taking a cut of your compensation for putting a stamp on an envelope.”
FOS case fees: “99 per cent of IFAs will not pay case fees”
IFA complaints: “They can become very emotional, far more than banks or insurance companies.”
FOS staff qualifications: “If the industry wanted all my staff to be as qualified as ombudsman the case wouldn’t be £550 it would be £2,000.”
Interest-only mortgages: ”It is not a fruitful area for claims firms and we have told them that”