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FOS strategy head defends service against IFA misconceptions

FOS strategy director David Cresswell

David Cresswell argues some advisers have the wrong impression about the service

The Financial Ombudsman Service’s strategy director has attempted to dispel a number of misconceptions he believes advisers have about the complaints adjudicator.

In an interview with Money Marketing, David Cresswell also offers tips on how IFAs should approach their dialogue with the FOS.

One of the first beliefs he addresses is that the FOS is “out to get” IFAs.

Cresswell says: “You are not in the witness box, or worse, that we are prosecuting counsel. We are absolutely not. We are not the regulator. We are not marking your homework. We are not looking at how you did or didn’t breach rules…For us, what’s that got to do with the consumer feeling this is unfair? It probably  doesn’t.

“We are not looking for trick questions but we do need to know what happened…What [advisers] think would be good legal tactics, holding back stuff, doesn’t help.”

FOS principal reveals keys to defending complaints

Cresswell says the FOS is not about “pointing out who is right or wrong, which rules you broke, who is responsible or not responsible”, but “finding a formula moving both sides on”.

He also rebuffs IFA criticism that FOS adjudicators are not sufficiently qualified to judge on advice complaints. The FOS is currently moving to a model where complaints are getting resolved quicker because queues don’t build up for specialist ombudsmen to deal with them, Cresswell says, and the organisation is able to spend less money paying adjudicators on retainers when complaints about their specialism dry up.

Cresswell has seen complex pension complaints taking months to solve, where it turns out that the case did not hinge on any of the reams of material provided to the ombudsman, but was actually settled by something very simple, like a client not receiving a statement.

He says: “When you say that, you get a sense of: why did it get this far? Why did no one see it? That’s the value of a third party. An experienced person vetting the background would be able to do that, and explain it in a way both parties will understand…We prove our worth not by showing which certificates we have got, but by taking control of the conversation.

“IFAs love it. Insofar as most IFAs have never experienced us because they don’t get a terrific number of complaints, this is what they thought it would be anyway.”

FOS cuts 600 staff over 2016

He urges IFAs not to write suitability reports for “what the solicitors or PI insurers may or may not say about regulations that haven’t been written yet”.

Cresswell notes another example where a 30-page suitability report had five pages of stock text about investment growth through the client’s 20s. The client was in their 50s.

He says: “If you are going to do that, IFAs, I’m really sorry about that. It can’t be what you wanted or what the service is about.

“It goes back to do what you think is best, you are the professional…We are in danger of losing the idea that IFAs are fabulous professionals, best placed to serve clients. I’m concerned if that’s replaced with covering their backs.

“I always say if you want to know about customer service go to an IFA.”

High Court rejects asset manager judicial review of FOS complaint

He encourages advisers to record phone conversations, which can be “so much more helpful than was it in the factfind or not”.

Few IFA complaints make it through to a final ombudsman decision, Cresswell notes, but IFAs “psych themselves up for that”.

Particularly over impending defined benefit transfer complaints, he says “we all rush to our fears” but we should not be scared of the latest sector that is being talked up as awaiting complaints.

But when decisions do go against IFAs, he says  the service is transparent on why this has happened.

He says: “We exist because everyone decided the courts were pretty hopeless at this kind of thing.

“Ultimately all you can say is we have got no secrets at all. We can’t have; every single Ombudsman decision is published.”

The FOS will set up its first out-of-London office in Coventry next month.

Cresswell says: “It’s always been an embarrassment to me that we have got all these people in London. In the long-term its unsustainable.”

However, he says the FOS, having looked at what it needs in locations like Manchester, Cardiff and Edinburgh, has found it would be three times as expensive as the deal it struck on its London premises.

He says: “The biggest challenge for us going forward is we can’t be London centric in any way. Its more than just where we are based, that seven out of eight people don’t live within the M25; we need to get how it is for an IFA in on the Isle of Harris and a single mother in Taunton.”



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There are 17 comments at the moment, we would love to hear your opinion too.

  1. What sticks in the advisers craw is that we are heavily regulated, have to pass QCF4 exams, have to hold PI insurance, have to confirm adequate capital adequacy and we continually hear how we are the best source for financial advice yet we are treated by the regulators as dangerous creatures not worthy of access to the legal system, not worthy of a 15 year longstop and not able to enjoy and independent appeal system.

    No other profession suffers these disadvantages.

    Whilst Mr Cresswell tries to paint a convincing picture many advisers will attest to fundamental flaws in the adjudication and ombudsman appeals process.

    I am aware of two pension cases that have been put on the back shelf for over three years due to the potential for the FOS to endure a judicial review and also the potential for clearly incorrect adjudications to be place under scrutiny.

  2. Really, Mr Cresswell?

    Why then do I have a case on my desk where your adjudicator has done precisely what you say you do not do?

  3. I concur with both previous posts having been in the business 40 years and experiencing dealing with the FOS directly. It’s all spin and tosh to justify theor jobs whilst circumventing the law!

  4. No matter how hard you try to avoid the it, the truth is that in some cases the FOS is correct. They cannot rely on disclaimers, paperwork as they have been on occasions used in an incorrect manor (which then leaves us all open to suspicion).
    However, noting all contact also will not help against the clients Jelly Fish defence (I have no brain, I did not understand) when the FOS looks at a case. There are many examples of clients having selective memory loss as the outcome is not what they wanted. Even at the expense of them looking stupid, but so what, they got their money back.
    It is wide spread knowledge that many lie through their teeth to push a claim in their direction and this is the big problem with the FOS. When there are NO consequences to your actions, your lies, why would a complainant not lie, forget or claim non understanding to gain the result you want.
    There should be a fall back position, that if it can be proven the complainant lied, has given false information, withheld vital information there should be a financial penalty and prosecution.
    The FOS will argue this would put consumers off complaining, rubbish, if it is clear it will only apply if it is proven you have tried to mislead purposely. This would make those Jelly Fish complainants at least think twice.
    The suitability letters are long winded not just because of the FOS, FCA but the ambulance chasing lawyers following behind them.
    The issue no on wishes to address is that in a Court Of Law, if contract law applied, many of these cases would go against the consumer.
    This highlights fully my feelings about the current financial services regulation, that Caveat Emptor is dead, no longer applies in the UK. It feels like a one way street, with regulators blind to the consumers refusal to take responsibility for their actions.

  5. “We are not looking at how you did or didn’t breach rules…For us, what’s that got to do with the consumer feeling this is unfair? It probably doesn’t.”

    This is the problem writ large. You can act within the rules but still lose the case because the FOS think it’s ‘not fair’ on the client.

  6. Hmmmm! I have had dealings with the FOS acting on behalf of clients against various Advice Firms, I will say if Some of us dealt with complaints in a professional manner the FOS would be less inundated with fewer case’s of spurious defence’s of the indefensible. With this I mean, The FOS should have rejected the complaint and returned the file to the Accused Regulated Firm and instruct them to review the complaint in line with Regulation, rather than endeavour to inflict additional stress upon the unintelligent public. What the FOSS can seen to have created is a back log of complains to justify the retainers as mentioned above, and yes I can provide several files which We as advisers would publicly admonish the Regulated Adviser and Network.

    • I don’t think anyone is claiming the FOS don’t get it right on many occasions or that firms give bad advice and get what’s coming to them.

      The problem is that this is done outside the normal course of law, by which I mean they have greater powers than judges in court, not to mention being able to forgo things like oral representation. On top of this they can relieve individuals of up to £150K of their money using this process.

      Let’s be clear about what happens in the court system as it stands. If you want to bring a simple claim using the small claims process the maximum award is £10K (and you get to state and argue your case in front of a judge). You can use the fast track process for claims between £10-25K (or less if the case is complex) and hearings are limited to a day. The multi-track process is the same as fast track but for claims over £25K, hearings can be over a day. Cases over £100K generally go to the High Court. Other than small claims, you can claim some of your costs if you win.

      Now, let’s say it was proposed that county courts were given the same summary powers, and were able to operate under the same rules, as the FOS. Apart from all the laughing from the legal profession, it would be classed as an outrage, against the rule of law, and dismissed without much discussion.

      In principle I would have no objection to the FOS system if it had limits in line with the small claims courts. However, being able to deprive an adviser of £150K of his or her own money on the basis of what’s considered ‘fair and reasonable’, even if it’s outside the law, is fundamentally wrong.

      Anyone thinking of quoting judicial review, forget it. Overturning a FOS decision based on the fact it was irrational is nigh on impossible. As far as I’m aware firms that have succeeded on judicial review all won because the FOS failed to follow due process not because the decision itself was flawed.

  7. Correction – they do not circumvent the law they change the law with the continuous upholding of complaints that are clearly time barred by the statue of limitations !!!!

  8. The FOS is a regulator, albeit one added without the acceptance by Parliament.

    They create precedential decisions and in doing so they create law.

    The inability to spot a vexatious complaint, or one without merit, was made clear when I attended the FOS convention in 2007 and asked how many such complaints they received in a year. The answer given was . . 3.

    • I’m not sure it’s really correct to say they create law. They do not set precedents that have to be followed by anyone, whether that be any court or themselves.

      What they are is a law unto themselves as they can make decisions based on what they consider to be fair and reasonable in any given case.

      • Perhaps I should rephrase and say they create regulation by dint of their decisions.

        These decisions act as guidance for advisers.

        Incidentally, if you look through the Dispute Resolution rules you’ll find that they are part rule and part guidance. When I have queried with FOS regarding how they treat these different portions they advise that they treat guidance as a rule.

  9. The only consistent thing about the FOS is the inconsistency, whether you are are complaining or defending. There is often a lack of logic or perhaps knowledge and the opposing parties have to put their case forward in ways that most people cannot fathom. It isn’t fit for purpose, somebody needs to grab this nettle by the throat. Simple things like proof that someone was at an address at a given time, or was capable of accepting a known risk, mind boggling stuff.

  10. Mr Cresswell seems a reasonable man and is stating that essentially, once you cancel out all the ifs, buts and maybe’s, their decisions are founded on what they see as common sense from a laypersons perspective. That is, of its self, not an unfair position.
    Unfortunately, however, that’s not the reality on the ground for IFA’s. Not be a long chalk.
    It’s a tightrope walk. On the one hand, we have the FCA with its two-metre-high indecipherable “hand book” of rules who, when you contact them to ask for some guidance on interpretation, tell you, with all the warmth of any seasoned dictator, that “we can’t tell you how to run your business”. Funny, that, as they seen remarkably adept at doing so after the fact, and/or retrospectively. Then. on the other hand, we have the FOS, with its entirely separate interpretation which (as Mr Creswell confirms), has (essentially), nothing to do with the rules OR the law. Sat between these two, we have the P.I. Insurers who agree with neither. Somehow, we are meant to please our client whilst satisfying all of these bodies at one and the same time.
    I had a long standing client contact me a year or so back and ask me if he thought it was a good idea to complain about an ISA he’d long since cashed in and which had been recommended by a previous adviser. The reason? He’d had a mail shot telling him that if he’d had any sort of investment product that he’d lost money on, there was a strong chance that he could have a valid claim for compensation. I happened to know about the ISA, as he’d mentioned it to me in the past. He had invested in a Tech stock fund when that sector went ballistic some years ago. He’d made a lot of money, then kept holding on, following which the bubble burst and he ended up losing money once he’d then crystallised his losses… He told me that at the time, he’d been fully aware of the risks, as the adviser had frequently warned him of them, but he wanted to go ahead. When I reminded him of this, he admitted it, but said, “yeah, I know, but it says here that it won’t cost me anything, and I’ve nothing to lose”. This was a retired company director who was both intelligent and nicely placed financially, thank you very much. So what chance the rest?
    Whilst ever we entertain ambulance chasers, have no joined up thinking on the regulatory / complaints front, and there are no consequences of false accusation for the public yet no recourse to law for the adviser, this merry go rounds of stupidity will continue unabated.

  11. @Whittington Dick
    What an excellent post.

  12. Nice comments from David Cresswell, but all rebutted by the commenst above. Perhaps he woudl liek to address all of the criticisms above? No…. thought not. You can’t defend the indefensible, you can just spin it with what is effectively an “advertorial” for the FOS.
    Neither the FCA nor the FOS are open as they may publish all decisions now (and I agree with about 80% of the FOS decisions), but when challenged on the 20%, they will not answer the criticisms of those 20%.
    I agree with Grey area, the levels of compensation shoudl follow a similar amount as to the courts i.e. £10k, £25k and £100k AND the Longstop shoudl be respected by the FOS and the FCA. Alan and I wasted our breath (and train fares) when visiting the FSA and FCA in turn to discuss the Longstop as Evan Owen did before him.
    David Geals, hang your ehad in shame for your failure to do ANYTHING but kick the longstop issue back in to the long grass for years to come. Shame on you all at the F-pack.

  13. What the FOS should have is an ‘INDEPENDENT AUDIT’ to check their practices and in particular the area whereby what their scrutiny is on FRUADULENT CLAIMS?

  14. Two things……It will be interesting to see the FCA’s approach to authorising claims management firms from 2019. If a case can be demonstrated to be fraudulent will the CMC have their ‘permissions’ revoked? That should result in a slowdown of complaints surely?
    Of much greater concern is the point we are at regarding investment markets. We are now eight and a half years into a bull market, the second longest in history. Sustained by QE but ever vulnerable to ‘shocks’ like consumer debt, North Korea etc as well as black swans. Almost every asset class other than precious metals could be hit very hard if the markets collapse and the complaints that will follow could sink the FOS and possibly even regulation itself. Apocalyptic it maybe but did anyone see the credit crunch coming and more importantly have any meaningful lessons learnt? The answer is contained in the film the Big Short.

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