The chief financial ombudsman has conceded that it may be difficult for
small IFAs to see the benefit of belonging to the Financial Ombudsman
Scheme because of the limited number of cases they are involved in.
Writing in the scheme's annual report, chief ombudsman Walter Merricks
says the service will rarely seem good value for money to small firms while
membership for bigger companies is quite cost-efficient.
His comments echo many in the industry who say small IFAs pay a
disproportionate amount for their mandatory membership to the ombudsman.
IFAs were involved in only 15 per cent or 2,795 of the 18,633 investment
cases dealt with by the ombudsman last year.
In the proposals for funding of the scheme, IFAs will be ringfenced so
their costs do not mix with other parts of the industry. Half the cost will
be divided between all firms, depending on their number of RIs, and the
other half will be covered with a per case levy.
Merricks says: “For a small firm of financial advisers, a small building
society, friendly society or small insurance business, the value of a free
dispute resolution service for its consumers is more difficult to
Riach Independent Finan-cial Advisers proprietor Bob Riach says: “For a
small IFA, I do not think it adds good value. A £500 charge for a
complaint that may be unf-ounded is extreme.”