Neil Liversidge: Why I have lost all faith in the FOS


Do you have any confidence in the Financial Ombudsman Service? If you do then I suggest you get your head checked pronto. On the other hand, if you want to sell anything I suggest you get yourself down to their offices without delay. The FOS is staffed by the kind of people who, if they were Eskimos, would queue up to buy fridges. Provided, of course, an IFA was footing the bill.

Last month, for once, I was only mildly displeased when I got my FCA bill. Despite forecasts of stratospheric increases, the Financial Service Compensation Scheme element (or “regulatory failure levy”) was only up 15 per cent on the previous year. Compared with the 258 per cent the previous year I took it in my stride. I am pretty sure next year’s bill will be bigger. Why? Because the FOS is driving more and more good firms out of business every day, so you can guess where their liabilities will end up.

Last week I heard from Sid, the owner of a small IFA firm near mine. Sid is one of the good guys. I have always found him diligent and honest, trustworthy and fair. So much so that I named him on the shortlist of those my wife should seek advice from should I die. Not any more, sadly, as he is shutting up shop.

The story behind it sent my blood pressure into orbit. In 2011, Sid was approached by an individual who wanted to make his own investment decisions within a Sipp. As requested, Sid researched a suitable product and organised the transfer. The client then engaged another adviser to buy non-regulated investments. He lost his money.

The FOS says it is Sid’s fault for recommending the pension transfer. The actual investment adviser the client used was not regulated and the client says he does not know who he was and cannot contact him. Now Sid has been ordered by the FOS to put this client back to where he was. The professional indemnity insurance will cover most of the claim but Sid has lost faith. He is closing down, transferring his active clients to another firm and going to work with them. The FSCS will be left to pick up the bill. Meaning eventually we will pick up the bill. Do I blame Sid? Not at all. Do I blame the FOS? You bet.

The Eskimos at the FOS see Sid’s client as unintelligent and naïve. In reality he is a GP with a property portfolio worth £2m who is a member of the NHS pension scheme. The value of the pension transfer was £40,000. Sid made it clear his advice was restricted to selecting a suitable Sipp for the transfer only and the client signed an agreement to that effect. The FOS disregarded the lot. Yes, Sid could litigate but his is a small firm and the FOS knows it. If he goes to court the FOS will fight him with his own money and ours. Among the qualities that define a society as civilised is the integrity of its systems and processes. The FOS has no such integrity. It needs reform now.

Neil Liversidge is managing director of West Riding Personal Financial Solutions