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Give peace a chance

Amid all the jetsam and flotsam of failed regulation over the past 20 years or more, one of the few succ-esses in all that time has been the growing influence of the Financial Ombuds- man Service.

For those with limited memories, cast your mind back to what it would have been like in the mid-1980s, when consumers had almost no recourse against their treatment at the hands of the financial services industry.

Yes, there were a number of ombudsman schemes in place even then, for example, the Insurance Ombudsman Bureau (IOB) in 1981. A few other financial sectors also operated similar schemes, including building societies and others.

But the reality is that even by the late 1980s, the IOB was dealing with barely a couple of thousand complaints a year. I still remember the sense of amazement in the mid-1990s when complaints “rocketed” past 10,000 for the first time.

Compare that figure with those unveiled last week by the FOS, which said it has received almost 128,000 new complaints in 2008. Admittedly, we are talking about a new “super-ombudsman” scheme, which has brought all the disparate bodies offering a similar service under one umbrella.

What is striking is not just the range of institutions facing the complaints – banks generated almost 60 per cent of them, while life insurance and investment contributed 11 per cent and general insurers 13 per cent – but the growing success rate of complainants.

Of the 114,000 adjudic-ations made in 2008, 57 per cent went in favour of the complainant. Compare that with average figures of 30 per cent or so for successful complaints in the 1980s and 1990s and you get a sense of a far more vigorous and interventionist FOS which, for the first time, is capable of meeting the real needs of consumers in an easy-to-understand way.

Equally important is ano-ther statistic also reported on last week by Money Mark-eting: the fact that comp-laints against IFAs have fallen in the past year to only 3 per cent of new cases, down from 4 per cent the previous year. Not only that but accor-ding to the FOS, only 30 per cent of complaints against IFA firms were upheld.

Now, by any definition, this is staggeringly good news, certainly for the IFA sector. It suggests that most independent advisers are much better at delivering the kind of advice that leads their clients to trust them more – and to complain about them less. Almost any IFA – or a self-proclaimed representative of the IFA community – would want to shout about these statistics from the rooftops.

Yet that is not how sections of the IFA sector see it at all. For them, keeping up the long-running sectarian war between themselves and the FOS is much more important than using information beneficial to the reputation independent advisers as a way of demanding vital changes to the RDR and the way bank and life insurance salespeople are regulated.

So, for example, we have Aifa policy director Andrew Strange calling in this paper last week for claims-handling firms, allegedly responsible for 26 per cent of complaints to the FOS, to pay towards its funding. The art-icle does not explain why other than to link this demand to the fact that IFAs contribute 5.6 per cent of the general levy but only acc-ount for 3 per cent of comp-laints – a total non-sequitur if ever there was one.

Even more intriguing is the Aifa call for the FOS to speed up its resolution of cases, presumably without any extra resources – or without even referring to those IFAs who are allowed to spend many months in ridiculous correspondence and time-wasting tactics in order to delay adjudications.

Neither of Aifa’s demands addresses a proposal from Financial Ombudsman Walter Merricks for complaints to be heard on a class action-type basis, which would certainly speed up the system and could lead to a reduction in costs.

But by far the worst offender is Evan Owen, boss of the IFA Defence Union, whose call is for Walter Merricks to be sacked and the FOS to be disbanded.

The FOS is dismissed by Owen and his supporters for allowing template letters to be used by complainants, not even recognising that without such letters, the hundreds of thousands of complaints over excessive bank overdraft charges would never have been heard. Or the tens of thousands of claims over missold PPI, a spectacular scandal that thankfully IFAs have always steered clear of.

And it makes me wonder what would happen if, by chance, the many thousands of victims of Barclays’ Bank’s latest alleged misselling scandal, so diligently uncovered by an IFA, were to use template letters to file complaints to the FOS. Or even if, God forbid, those affected by the old Lautro standard charges scandal, a cause espoused by Owen himself and supported by many journalists were to use such means to obtain redress from the guilty companies.

In the past 10 years, the FOS has become one of the most important champions of consumers. Instead of continually slagging it off, it is time the IFA community made peace with it and came up with ways to ensure that its members do not face excessive charges, even when they win their case before the FOS. The alternative is continued irrelevance.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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