It is clear that so long as the Financial Ombudsman Service exists in its present form it will be mired in controversy. It is equally clear it will not enjoy the confidence of the adviser community and whatever the FCA’s longings for simplified advice, it will remain the de facto regulator.
Three simple changes to the way the FOS operates would transform it and go a long way to restoring advisers’ confidence in it. The first of these would be to require claims management companies to pay the case fee upfront on a non-refundable basis. At a stroke, by forcing claims management companies to put some skin in the game, this would eliminate a large proportion of meritless claims. As claims management companies take, on average, between 25 and 35 per cent of compensation awards anyway, they would hardly be out of pocket.
The second change should require payment of a small commitment fee by individual claimants, say, £50, refundable if their complaint is upheld.
My third proposed change, however, is the real path toward a fairer FOS. There should be a decisions review panel consisting of experienced advisers to whom firms, for a fee, should be able to refer FOS decisions before a final adjudication is formally pronounced.
The panel should not have the power to overrule the FOS but it should be able to ask it to reconsider adjudications where it believes it is merited. You might ask why I would charge advisers a fee. To which I would reply: because that is consistent with what I propose for claims management companies and individual complainants.
Charging a fee would weed out the bad losers and the vexatious as much with advisers appealing to a review panel as with consumers complaining to the FOS in the first place. The same fees would also, of course, fund the cost of the panel’s work.
Both advisers and complainants should be anonymised in cases referred for review. Ideally, the panel’s members should also be anonymous to head off any ideas of lobbying or bias, not to mention the earache.
But if the panel could not over- rule the FOS, what use would it be? First, the mere existence of a review panel would make adjudicators a lot more careful about the decisions they hand down. Second, the panel would be a resource for FOS adjudicators, making available to them the kind of experience and expertise it seems to lack.
Third, the panel would be able to gather data on the quality of FOS adjudications by reference to those referred to it. This could be the most useful function of all.
Whereas it is clear many advisers are unhappy at their treatment by the FOS, hard facts are always difficult to come by.
However aggrieved they feel at the perceived injustice, many advisers have no wish to publicise the fact they have lost a case. Taken together, these measures would truly improve the service and restore advisers’ confidence in it.
Neil Liversidge is managing director of West Riding Personal Financial Solutions