The Financial Ombudsman Service says IFAs are better at handling complaints than large financial organisations but it still backs the implementation of the Retail Distribution Review to eliminate commission bias.
Giving evidence to the Treasury select committee today, FOS chief executive Natalie Ceeney said IFAs were better, on average, at handling complaints than large businesses because of the “personal” approach they take to investigating the matter.
She said: “By and large, for smaller firms – and I include independent financial advisers in this but also small mutuals – because it is a very personal business and a personal customer, they really want to do a thorough job. It is unusual for a smaller business that we get a complaint where it hasn’t been taken personally and that the investigation has been done thoroughly.
“If I contrast that with some of the larger businesses, you do too often get a standard letter that might have been issued to many customers that could have just come out of a machine.”
She said IFAs are doing a “pretty good job” on complaints handling, adding that IFAs make up only 1 per cent of all complaints, the majority of which go in their favour.
Ceeney said: “Independent financial advisers win more complaints than they lose. In contrast overall last year, firms lost more complaints than they won. I think that is quite a good measure of some of the investigative work independent financial advisers do on the complaints that they receive. So by and large, we are finding they do a pretty good job on complaint handling.”
TSC member Jesse Norman asked if the FOS supported the RDR, given that IFAs have so few complaints, relatively.
He asked: “Do you regard it as surprising that there should be a piece of legislation whose effect it is to undermine an industry which has done very well, from your point of view?”
In response, FOS deputy chief executive Tony Boorman said the FSA was “sensible” to want to eliminate commission bias.
He said: “I think commission bias is the type of thing we see right across the financial services sector, so I think it is quite right to look again at the rules of this marketplace to try and eliminate commission bias, in whatever part of the building it arises. Tackling commission bias, I think, is a sensible regulatory stop.”