My last column looked at the work we have been undertaking with the FCA to provide guidance on suitability reports. The aim of this guidance is to give advisers greater confidence on how to structure information in a way that encourages consumers to engage with the report document, while protecting themselves in the event of a complaint.
Feedback the article received from advisers stated it was not the FCA’s approach to suitability reports that was the significant issue, however. Instead, several advisers noted it was the attitude of the Financial Ombudsman Service that creates the most uncertainty.
We have also been in discussions with the FOS regarding its approach to decision making. This was in response to members’ concerns about a variety of issues, including inability to access adjudicators by phone, the quality and qualifications of staff, the unfeasibility of timescales and the choice of index used for compensation, among others.
Working with members, we presented the FOS with cases that demonstrated these issues and held several meetings together to discuss the finer details. While we do not agree with the ombudsman on all issues, we found its response to some points reasonable.
One tangible outcome of these meetings will be some soon-to-be-published guidance for members on how to deal with it in the event of a complaint and what you can expect from the process. Along with helping members, the aim of the document is to be able to hold the FOS to account in the event adviser experiences do not match up to its stated policies as outlined on its website or in its guide for smaller businesses.
So what were the key areas of concern? One issue was a feeling from advisers that it was difficult for them to access an adjudicator and that, in certain cases, this was in stark contrast to the relative ease of access for a complainant.
The FOS states it is keen to “ensure [it] is accessible to all parties” and we have been pleased to hear chief executive and chief ombudsman Caroline Wayman speak out publicly on the issue and state it is working to improve the situation.
Members have also come to us with fears that investments under discussion are sometimes not looked at on a portfolio basis by an adjudicator (i.e. only as part of an investment within a portfolio).
As such, the FOS could find against a firm for recommending a high risk product to a client whose approach is considered medium risk without taking into account the medium risk profile of the overall portfolio. Such an approach goes against the FOS’ stated policy that it “takes into account the overall level of risk that all the assets held represent”.
Advisers should ensure they provide evidence that, rather than being a separate piece of advice which is considered a specific investment in a vacuum, the recommendation was provided in a way that emphasised how the investment fit into the overall strategy and as part of a portfolio to spread risk.
The FOS’s willingness to engage on these matters has been very welcome. The guidance has been just one aspect of our engagement with the ombudsman but it will hopefully boost advisers’ confidence in their dealings with it, including details of the avenues open to them if they are dissatisfied with the process.
That said, an even stronger signal to advisers that they can trust in FOS decisions would be the creation of an independent appeals process. We will continue to work towards this goal.
Caroline Escott is senior policy adviser at Apfa