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Lighthouse expects £3.18m worth of complaints

Lighthouse Group has made provisions of £3.18m to settle complaints from clients for 2009, up from just £133,000 in 2008.

Lighthouse says while its complaint provision has increased markedly, the costs will be covered through professional indemnity insurance and excess payments from advisers. It expects the maximum cost to the Group to be £247,000.

The network says it provides in full for complaints where there is a 50 per cent or greater likelihood of redress.

Finance director Peter Smith says: “All bar the insurance excess would be picked up by the PI insurer and a relatively small amount, depending on the type of business, would be charged to the adviser.”

Smith says the increase in provision, from £133,000 to £3.18m, reflects the current economic crisis.  

He says: “What you have got to look at is the economic backdrop that we have had over the last 18 months. In times of plenty people do not typically complain about their investments. If markets fall people generally look for someone else to blame and typically that comes back to the distributor.”

Lighthouse Group has today revealed pre-tax profits of £93,000 for 2009, compared to losses of £8,494,000 the previous year. The results show earnings before interest, tax and depreciation nearly doubling, from £553,000 to £1.1m.

Executive chairman David Hickey said while Lighthouse does not have an estimate of the total cost of the RDR in the lead up to 2012, he said it is unlikely to be significant.

Hickey says: “We are expecting it to bring some dislocation and some cost, but we are not expecting it to be dramatic numbers in the context of the Lighthouse Group.

“There is more expense to come in term of IT connectivity and systems, and while we expect to spend more on RDR over the next three years, there will be no drama involved.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. “excess payments from advisers”?


  2. Incompetent Regulators Awards Team 22nd March 2010 at 11:19 am

    What a sad state of affairs financial services industry is in.

    The FOS is doing it’s job well as the largest ‘Ambulance Chaser’ in the UK. This is all bullsh*t. Fos does not recognise fraud which allows the system to be abused.

    I can’t believe all these complaints are genuine especially now we have a compensation culture thanks to the F-Pack system.

    Bring back Caveat Emptor and lets get on with new innovative product developments. Exceot under Nast Bitchy Labour that won’t happen.

  3. What a sad state of affairs Journalisum is in, when an attention grabbing headline is used to sensationalise and then in your own article you say “the costs will be covered through professional indemnity insurance and excess payments from advisers. It expects the maximum cost to be £247,000”.

    For the avoidance of doubt the suggestion of recovery from Adviser is to do with the excess on the PI insurance for the adviser who gave the advice, and not the industry as a whole.

  4. The size of the complaints bill is enormous in relation to the turnover figures, if accurate. To blame the economic crisis is very suspect, we are all in the same boat re impact on clients who are invested in the stockmarket but thankfully we have not all experienced any discernible rise in complaints. I suggest Lighthouse review their Compliance procedures and encourage their membes to set lower & realistic durable targets for the sake of our industry and the rest of us who will be affected by the high claims experience of some firms in due course.

    This explanation lacks credibility and situation is so damaging for our industry – sad indeed.

  5. Without knowing the basis and the nature of all these complaints, it’s difficult to comment, but the bottom line has to be scrupulously thorough FactFinding followd up by comprehensive and, of course, a technically accurate and equally thorough report & recommendations.

    Virtually all complaints are predicated on a claim that if I’d been told this, I wouldn’t have done that or, perhaps, that no account was taken of XY&Z. If the client/s confirmed by signing it that the FactFind was complete and accurate in every respect and if the report & recommendations dotted all the i’s and crossed all the t’s, then in theory you should be fireproof. An additional safeguard is to require the client to confirm that s/he has received and understood the letter of recommendation.

    Of course, there will always be exceptions to the safety of such a modus operandi, but by and large it should stand you in pretty secure stead.

    Such a large complaints bill does rather suggest systemic failures in Lighthouse’s training and quality control systems.

    Caveat emptor doesn’t really cut it, in my book. The client seeks advice because s/he doesn’t know the territory and the adviser has to be responsible for his recommendations. The only responsibility of the customer is to read the material he’s been given, including all the relevant risk warnings and tax considerations, so s/he cannot found any complaint on the basis of if I’d been told this, then I wouldn’t have done that.

  6. I am not familiar with Lighthouse Group but I agree with Julian it does suggest some kind of problem with the systems and processes being used. I accept that some complaints are more likely to happen in a difficult economic and investment climate but this looks excessive even for that.

    The other parties to pay for this of course will be all those other IFAs who have not had complaints whose future PI premiums will rise as a result of these claims.

  7. Robert Donaldson 22nd March 2010 at 1:12 pm

    Clients often hear and read what they want to read. I think that the system has got to the stage where people know that they face no cost in complaining therefore why not try it. Nothing to lose.

    I also accept that clients seek advice and therefore it should be given professionally, but giving clients 25 page key features documents, 12 pages reports just covers your backside, it does not necessasrily mean the client actually understands the risk.

    Rather then minutes quality time explaining charges, risk and objectives is better but unless you can tape conversations legally, then you will still get people complaining.

    Wouldn’t you if you stood to lose nothing and pay nothing.

  8. Never Too Old To Rock 22nd March 2010 at 1:15 pm

    ‘Don’t Worry, Be Happy’——Bobby McFerrin

  9. Julian, it is a common network problem, how big would the FSCS levy be be if most of them went bump this year – or next?

    All under the watch of the FSA.

  10. Richard Wyatt-Haines - Exeter & Pioneer 23rd March 2010 at 12:10 pm

    The article and the subsequent comments highlight the issues we face is an industry; complicated products and processes, combined with low levels of financial awareness amongst consumers leading to multiple surprises and much disappointment for our customers, further undermining their faith in us. And then we try to rationalise it all away.

    Joe Public simply doesn’t understand most of what we talk about (and most probably doesn’t care). We must either provide simple products which are communicated in a simple way (the approach we are adopting here at Exeter) or provide outstanding guidance through highly professional people so that our customers don’t continue to suffer from our industry’s inadequacies.

    The Which? report today on the inadequacies of the banks’ sales practices reminds us that the problem is endemic to us all; providers, intermediaries, banks and regulators.

    We all have a responsibility to change things fundamentally so that consumers have the faith to spend their money with us rather than choose to spend it on their mobile phones and Sky subscriptions

  11. 25% can not even find a plumber in the yellow pages! What are we supposed to do? Educate them? 25% can not even read-granted they are not my clients but that is the pool we are drawing from.

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