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FOS ‘myth busting’: Chief warns financial quals would see case fees quadruple

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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.

Ceeney on:

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”

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Comments

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  1. Financial Ombudsman Service chief executive Natalie Ceeney says forcing adjudicators to gain financial qualifications would lead to a quadrupling of case fees.
    Whereas forcing advisers to gain qualifications means the FCA expect advisers to reduce charges to clients.
    If we used your logic Ms Ceeney we would quadruple our charges.
    Furthermore could you please publish those keydata cases where FOS has found in favour of the adviser or dismissed the claim.
    Not only do adjudicators at FOS have no financial qualifications,neither do they have any legal qualifications and are not lawyers or judges as Ms Ceeney seems to suggest.
    FOS website clearly states, that to be an adjudicator NO qualifications are necessary.qualifications.
    One rule and one set of charging for Quangoland another for us.

  2. I will leave others to comment on the qualification elements of this article, but would refer to the statement below.
    “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”.
    Indeed so. In which case where is our ‘Regulatory Dividend”? Why don’t we get some peace from the interminable edicts, injunctions, instructions and criticisms? Why don’t the Regulators concentrate their efforts elsewhere in areas where the problems are most apparent? Why no action on Payday loans, on Nigerian Scams on Spanish and US Boiler Rooms, on products which don’t do what it says on the tin and so forth?

  3. I’m only a mortgage broker. However for Natalie to say ‘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’. is utter rubbish to me.
    Most fully qualified Financial Advisors I know would jump at the chance to have a full time salary, pension, holiday pay, regular pay, sick pay etc & to potentially progress to a salary of £60k -£80k.
    If she’s struggling, why not offer all the unemployed Barclays, Lloyds, HSBC etc etc advisors that have just been given the boot due to RDR a job? They were on basic salaries of £25 -£45k.

  4. Why on earth should case fees quadruple? Its very simple, like us they should study and sit the exams in their own time and have a set time by which they must attain these or, agian like us they are out of work. For her to say they do not need to be qualified is a shameful statement. How can they “judge” if advice is proper or not if they are not qualified in fainancial advice in the first instance? It is a ridiculous statement to make. As for her comment that it would be unfair to charge CMCs a case fee to bring a complaint as it would be passed on to “vunerable consumers”. What about network members who have to pay the fee and then if they win, have no way to recover the cost? What planet is she on? She may have no power to do this but the FCA do and it would be very easy for them to do so. It is just ridiculous.

  5. PS A CMC case fee would stop a lot of people from allowing these parasites to make a lot of spurious claims, wasting everyones time. If people had to pay the CMC the fee if they lost the case they would think twice about trying it on. Better still if it was found to be spurious the “client” should be charged with attempted fraud as should the individual within the CMC that pursued this. The whole thing is a total disgrace.

  6. So as usual it is one rule for us and another rule for them!

    Financial services should have one rulebook that is enacted across the industry including regulators and ombudsman and if cases need to be reviewed by qualified staff then so be it. Isn’t it incredible that we have unqualified staff earning between £60,000 to £80,000 per annum.

    Does is mean that I can apply for nurses job without having any qualifications the answer to that question is obviously no. If the FOS need qualified staff then train some on apprenticeship schemes instead of whingeing that you don’t have enough staff after all we did have FOUR YEARS WARNING that new qualification levels were coming in just like the rest of the industry.

    I would also dispute whether fees would quadruple if they were using qualified staff I personally think that the main reasons why the fees are so high in the first place is that the FCA has encouraged a culture of clients claiming particularly bogus claims. Surely the consumer should be charged a modest be to review the case if it goes to the FOS if the client wins their case then this fee would be repayable as part of compensation.

    It is not right that the industry picks up the entire costs of the FOS and charged £500 whether the case is won or lost this is simply unfair. The funding of the FOS needs to be looked at and I suspect if a modest charge was introduced even at £150 it would get people to think whether they have a legitimate claim.

    I’m all for treating clients fairly but there is also an increasing problem with bogus claims particularly encouraged by claims management firms.

  7. Matt Worthington 16th August 2013 at 10:27 am

    Gary and Marty above are entirely right on the qualifications nonsense.

    “Ombudsmen have average salaries have between £60,000 to £80,000. Adjudicators start on £22,000 and they are typically paid £30,000 to £35,000.”

    These are hardly minimum wage salaries, and you can bet that they come with some decent benefits too. I have acquired a baffling range of CII qualifications and ‘designatory letters’, and I would be happy to work for those salaries. Far better excuses needed I’m afraid FOS.

  8. Worth pointing out in all these discussions that the majority of FOS cases deal with administrative incompetence and obstructionism. Things on the level of your travel insurer not paying out over small print, or your bank failing to deal with a cash ISA transfer. Financial qualifications are irrelevant to most of their work. So Ceeney is quite right to say that there is no need for *most* of their staff to be qualified.

    Whether the minority of staff who look at financial advice issues should have financial advice qualifcations is another debate. She has been somewhat injudicious with her choice of words (I bet people in this thread are going to jump all over “not financial experts”) but I prefer that to the usual PR doublespeak you get from the FCA.

  9. If what Ceeney says is true, how is it that Sir Anthony Holland, already a highly qualified and respected lawyer, took it upon himself to pass the FPC when he became chief PIA ombudsman?

    (S)he who asserts must prove.

    I also wonder if by referring to 99% of IFAs, Ceeney is treating each network as one IFA when, to any reasonable person, each member would be a separate IFA in its own right.

    If so, then I would argue that she is being unclear, unfair and misleading.

  10. As I have said on other threads – the minority of responsible CMC’s (The ones you won’t have heard from if your sales processes were robust) would have no issue with paying a case fee. I would be happy for the case fee to be initially split between CMC and lender – with the losing party then being forced to refund the winner when the case was concluded. Or the alternative – make the losing party pay the case fee retrospectively. You could even extend this to consumers with a fee exemption based on income similar to the county courts.

    Getting back to the main point of the article I believe wholeheartedly that not only should FOS staff be qualified but that complaint handlers in all organisations (including CMC’s ) should be properly trained and qualified. The level of knowledge currently is woeful compared to what it was even 2 or 3 years ago.

    As a company we don’t make claims that are spurious and don’t escalate cases to FOS where we don’t think there is a valid case – that’s why our win rate at FOS is over 89% – it would be higher if certain lenders responded to complaints within 8 weeks.

    The main reason that so many cases are at FOS is the appalling way the majority of (predominantly larger) lenders defend complaints without looking at their merits. If they didn’t – all the cases at FOS could be dealt with by experienced (and in most cases qualified) adjudicators and the speed and quality of decision would definitely improve.

    And before the deluge of comments – I am well aware that most CMC’s operate differently – but in the same way I don’t assume all advisers are at the level of the least professional please don’t assume all CMC’s are at the level of the unprofessional majority.

  11. There is a simple answer to this problem.

    Ensure that all adjudicators and ombudsmen are qualified to QCF4.

    Charge a fee for each complaint which is refundable to the complainant if successful.

    This will increase the fee income and serve to reduce complaints as the opportunistic and spurious would not want to chance a complaint when it is their funds at risk.

    Reducing complaints would also reduce the numbers of FOS employees and as they continually tell us, this is what they would like.

  12. Fantastic. Create a culture where you encourage everyone to claim regardless of cost because there’s no financial penalty attached to those making the complaints, and what do you get? A job for life. Having made complaints to the FOS in the past and knowing how they operate all I can say is; ‘it ain’t good’.
    Now my qualifications are actually being recognised I’m really looking forward to earning four times more in the future. Can’t see it happening though!

  13. She is probably correct in that most adjudicators don’t need financial services qualifications but what they do need is someone to refer to when the case is old and stale, when the world was a different place, when rules and regulations were distinctly different to what we have today.

    However, calling them “judges” is laughable, what would a judge with thirty years under his/her belt say if he/she was going to be “judged” by an adjudicator who had no legal qualifications? It simply wouldn’t happen would it??

    I would contend that the real reason the FOS doesn’t want FS personnel was clear to me when many adjudications made by certain well qualified individuals at the FOS were reviewed 12 to 18 months after the adviser had been given the all clear. They had been fining in favour of too many advisers and that wouldn’t do would it?

  14. incompetent regulators 16th August 2013 at 11:23 am

    When you have a totally flawed system like this then anything goes. The place is riddled with fraudulent claims. All because of compensation culture created by bad politicians and when people hit hard times they try it on with no recourse to the claimants and FOS.

    One day we will look back and see what they did with horror. It’s purely a job creation scheme for people who can’t get jobs in their own fields.

  15. “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”.

    I think you have entirely missed the other very important point, dear girl.

    Unlike banks or insurance companies, all this comes directly out of our pocket – not the shareholders – not some unfathomable cash account that is a fraction of the advertising budget.

    The big boys factor in compensation in their costings. 10,000 of product A at a margin of 23% less 5% for compensation still gives us a healthy margin. Doesn’t work like that for IFAs – or haven’t you figured that one out yet?

    As an adjudicator and a lawyer I guess you may not be as numerate as a qualified adviser, but a quick look at the accounts of Barclays –who are about to raise £5.8 BILLION in a rights issue.

    Might I point out that in 2012 their total income net of claims was £24,539 Million. Their pretax profit was £6,901 million. That’s 28% on turnover. Their provision for PPI was £1,600 million – 6.5% of turnover. Their net pretax profit was therefore £5,301 – still a very healthy 21.6% of turnover.

    AVIVA – who did poorly made £776 million in the six months to June 2012. The full year operating income was £1.776 Billion and the profit £1,008 million.

    So Natalie old love – do you really think any of the directors or employees of such firms give a toss about your costs or fines? Do you think it affects their pay packets or bonuses?

    Do you think any of them lay awake worrying what your outfit will do to their business?

    No, I thought not. Then why are you surprised when we get ‘emotional’ – even though we only account for a flea bite of your workload?

  16. On a more lighthearted note, what on Earth has happended to Larry In London? I’ve not seen him on these pages for months. Perhaps he’s retired from our blighted industry and is sunning himself in Monte Carlo.

    Miss you Larrykins and your Friday witticisms x

  17. 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.

    Not sure why them having financial qualifications would lead to an increase in costs – there are many well qualified staff in financial services that would love to be paid these salaries.

  18. How about exploding this myth Ms Ceeney
    “FOS is Unbiased and judges the consumer & Adviser equally”
    Here is another one
    FCA are not an aggressive regulator

  19. Larry in Monte Carlo 16th August 2013 at 1:32 pm

    Alive and well and currently finishing my second Pimms, oops, third now.

    Harry, old chap (I know you like that epithet) the dear girl in question is not a lawyer, previously shoe sorted books at the British Library.

    If you recall the advert for the Chief Ombudsman job it stated that legal experience was not necessary. Applies to adjudicators and ombudsmen too. They only need a degree in bias and an understanding of their place in the echelon – directly beneath the FCA.

  20. “Harry Katz | 16 Aug 2013 11:26 am

    “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”.

    I think you have entirely missed the other very important point, dear girl.

    Unlike banks or insurance companies, all this comes directly out of our pocket – not the shareholders – not some unfathomable cash account that is a fraction of the advertising budget.

    The big boys factor in compensation in their costings. 10,000 of product A at a margin of 23% less 5% for compensation still gives us a healthy margin. Doesn’t work like that for IFAs – or haven’t you figured that one out yet?

    As an adjudicator and a lawyer I guess you may not be as numerate as a qualified adviser, but a quick look at the accounts of Barclays –who are about to raise £5.8 BILLION in a rights issue.

    Might I point out that in 2012 their total income net of claims was £24,539 Million. Their pretax profit was £6,901 million. That’s 28% on turnover. Their provision for PPI was £1,600 million – 6.5% of turnover. Their net pretax profit was therefore £5,301 – still a very healthy 21.6% of turnover.

    AVIVA – who did poorly made £776 million in the six months to June 2012. The full year operating income was £1.776 Billion and the profit £1,008 million.

    So Natalie old love – do you really think any of the directors or employees of such firms give a toss about your costs or fines? Do you think it affects their pay packets or bonuses?

    Do you think any of them lay awake worrying what your outfit will do to their business?

    No, I thought not. Then why are you surprised when we get ‘emotional’ – even though we only account for a flea bite of your workload?”

    Fantastic post, Harry!! You are so right!!

  21. Harry
    calm down dear
    stop getting so emotional
    you will need a behavioural psychologist at this rate.
    It is not Ms Ceeney’s fault she has no clue about economics, she is only your judge after all.

  22. Ceeny’s comment are ridiculous. She mentions only 1% of case load is of IFA. But in reality only 1 case with wrong judgement from FOS could bankrupt the IFA. There is no right of appeal. The adjudicaters are not trained. The complaintant does not have to pay any fee to raise complaint win or lose. In other words FOS can be termed as kangaroo court. Advisers are totally at their mercy specially now Limitation Act is ignored by FOS and cases more than 20 years old are referred. Surprisingly british parliament most respected in world for fair justice is turning blind eye to this injustice or our MP’s have become timid.

  23. It hurts so much to read this.

    They make decisions on your livelihood and they aren’t even qualified but we get put through the ringer.

    They should be qualified to Chartered status or at least to the same status as the adviser theyre judging or they should be sacked like we would be if we didnt get diploma.

    How utterly hurtful she is so ignorant.

    Our profession has gone to the dogs.

    The good news is theyll have no complaints to regulate in a few years.

    Oh and this article of adviser numbers increasing i refuse to believe it. I think theyve fallen through the floor!

  24. Fenella Flobbit 16th August 2013 at 8:30 pm

    Intermediaries have had to pay from their own pockets the costs and time of getting qualified, so why not FOS staff? Unless a vast number of them were to fail to make the grade, thereby leaving the FOS with a severe shortgage of staff, why should it be a problem? Aren’t these people sufficiently knowledgeable of the cases they’re judging to prove it?

    And why, if the FOS’s case load comprises no more than a minuscule 1% attributable to IFA’s, why does the FSA continue without mercy or respite to kick seven bells out of the IFA sector? As already mentioned, where are the regulatory dividends spoken of by Martin Wheatley when he first took office? Or was that just a politician’s soundbite, an attempt to fool us into thinking that the FSA Mk.II was going to be “a very different animal” from the FSA Mk.1?

  25. @Suresh
    You are so right suresh
    if we heard this was happening anywhere else on earth, the British government would be intervening and Amnesty International would be involved.

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