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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 



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There are 24 comments at the moment, we would love to hear your opinion too.

  1. I have to say in the past I have understood in the main why FOS decisions were reached- but this seems ludicrous and FOs need to take a long hard look at this case. Was this Adjudicator or Ombudsman- SIPPs are going to become more frequent and bar ensuring investments are within tax rules I don’t see why the provider or the advisor should be held accountable for decisions a customer makes- unless the later has been contracted to do so. FOS come on as I really want to support you but this case just sounds silly- what did you think you saw that meant you should uphold this? Our BMU team now specify exactly what caused the grade and this has been most helpful feedback we get. Come on FOS …..

  2. paolo standerwick 7th August 2015 at 2:53 pm

    What Sid needs to learn is that ALL PUBLIC SECTOR employees have an ENTITLEMENT ATTITUDE and could quite often turn into compo chasers. That may be a sweeping statement, but it’s true. If one was to look at their own client base and see what type of client they have, this will be proved correct. They’ve never had to actually produce economic wealth for the greater community. The clients an IFA serve in the main are in the private sector. So the starting point here is beware of public sector workers, they expect only positive results and if things don’t always go their way, they will seek to claim against anyone. The FOS staff are of similar mind too, hence their empathy. They also have the luxury of no accountability which someone else pays for when something goes wrong at their end too. It’s a bit like an old boys club. I feel sorry for Sid, but when you have been around as long as I have, that’s the world we have allowed to develop.

  3. I have also lost faith after an awful case for one of my clients recently. The adjudicator produced a minutely-detailed report that appeared to cover every relevant angle fairly and in line with what was expected, to be over-turned by the Ombudsman is a casual, single-paragraph dismissal that completely ignored both the facts and the Adjudicator’s findings. My client would have a good case if he went to court, but it would be him against a multi-national with a perverse FOS ruling to use as defence. The baddie won because of FOS backing. Regulators need to be accountable, like the rest of us.

  4. The longer this lunacy pervades the more bizarre are the decisions. There is maelstrom in the making which will inevitably suck this industry down – I refer to the tidal wave of complaints that will arise through Pensions Freedom all of which will be found in the clients’ favour. You can always count on Americans to do the right thing – after they’ve tried everything else said W Churchill. The Government will eventually do the right thing when common sense has been bludgeoned into them and the industry is ruined. At some stage ….. surely ….. the FOS will recognise that when someone signs a piece of paper they have to take SOME responsibility for their decision.

  5. How’s this one then Neil.
    Client approached his IFA wanting to transfer his DB pension into a SIPP to make his own choices. IFA said “No. You need advice on doing this. Its not something I will advise on, so I will refer you to someone else.” That 2nd IFA looked at the TV, ran the analysis, and concluded it shouldnt be done. Told this to client. Client explained that he wanted to buy offshore off-plan property with his SIPP. So 2nd IFA produced his report, telling him not to do the transfer AND explaining whilst he didn’t advise on offshore property, he certainly didnt think someone should transfer a DB pension to buy such an investment. He listed a set of fairly robust risk warnings/reasons for not investing like this.
    Client came back and said he was insisting. So IFA issued a second letter confirming the points, and told he would only arrange the SIPP if client signed to say he accepted the recommendation not to transfer. (Client had worked in financial services previously)
    Suffice to say, FOS decided that the 2nd IFA simply should not have proceeded and therefore was liable. Not to worry: even thought the first IFA wasn’t even conducting regulated activity in referring to the 2nd (specialist) IFA, FOS decided he was also liable.
    Is this the result of justice on the cheap, or just politicised decision making? Either way, no Court in England would have done that.

  6. I’m not really surprised – when it comes to pensions, particularly SIPPs this is typical of FOS. I had to deal with something similar although not the same, 7 or 8 years ago and you couldn’t have made it up if you tried. Not only that but when we calculated as FOS requested – the client was better off. So, what did they do – change the calculation formula, we worked it out, client still better off (by even more), so what did they do (yes, you’re getting the hang of it now) – yep, you guessed it changed it again. In total they moved the goalposts 4 times, changing dates and formula. Every single time the client was better off; and there was nothing wrong with the advice in the first place.

  7. John Hutton-Attenborough 7th August 2015 at 3:28 pm

    So despite the FCA “guidance” on how to deal with insistent clients the above clearly demonstrates that to deal with such people is tantamount to madness.

    • No, because as has recently been stated, there is no discord between the FCA and the FOS 🙂 Barrack room lawyers comes to mind…Although I don’t think most of them carry any legal qualifications either, so what actually is going on at FOS?

  8. Douglas Baillie 7th August 2015 at 3:30 pm

    I am sure that there are many more Advisers who have suffered as a direct result of this highly questionable FOS decision making process.
    The sad outcome is that whilst the complainant can resort in common law and appeal an Ombudsman’s decision, the FOS have arranged within its own constitution, that the adviser is denied that right. This gives FOS the unfettered and unchallenged role of judge, jury and hangman.
    Hopefully MM will use its strong industry position to request advisers to provide their research journalists with more examples of the FOS making unfair decisions.

  9. I had a vexatious complaint made against me relating to an Equity Release case I had recommended on whilst a member of a now ex/failed network (Network Data). As is often the case with equity release, it came from an unhappy family member. Not to worry as I had an excellently compliant and thorough file including personal letters sent to me by the client himself explaining his correct understanding of the arrangement in advance of commencement. Initially and wrongly I dealt with the complaint myself rejecting it and providing all the necessary information to support my reasoning and as I thought it, fairly straightforward and black and white. I then received a solicitors letter initiated by the complaining son, so I revisited the subject and having checked with my compliance support company it became clear that I should have referred the matter to the FSCS from outset as the Network for whom I was an AR had gone bust. I advised the solicitor of this, referred them to the FSCS and contacted the FSCS myself to say that I had the file and could provide anything they required to defend the complaint. Having heard nothing from the FSCS after three months, I contacted them again and repeated that I had the file – fact find, suitability report, illustrations, client communications, file notes etc. and that I knew that the old network had never had the file so the only way the claim could be defended was with ‘my’ file. They said they were amazed that I was even bothering to try and defend it as most people in this situation would be happy for the FSCS to take on the case. I explained that morally I was incensed by the complaint that was, in my opinion, wholly defendable against and that it presented reputational damage against me whether or not the Network was still in existence. I gave the advice and still stood by it. I offered the file again. It is now around 9 months since the complaint came in and I have never been asked to present the file. I can only assume that the FSCS have rolled over and paid out a claim which is absolutely wrong – but that’s alright I guess because the readership of this paper must have shared the compensation between them – so I just wanted to say thank you to you all for your support.

  10. Man inBlack, please provide the case reference so we can look it up. Sounds ridiculous though.

    And I’m sure everyone in the industry has lost faith in FOS – way too powerful with no oversight.

    Also, the concept of FSCS being completely funded by the remaining “good guys” that survived and only in arrears is laughable and flawed. At least any “profits” from fines and penalies to misbehaving forms should be used to offset these costs.

  11. FOS case reference please?

  12. The case reference number is DRN9611874 for those that wish to make up their own mind.

    In my view it is a concerning decision. Whilst not the same, the potential similarities with insistent pension clients means that those advisers that think it’s ‘safe’, in any way shape or form, to deal with those clients should think again..

  13. @moneymarketing please can you do a freedom of information request to FOS to list the qualifications of their people? Particularly the employees who make these very silly decisions

    • I ask this question of the adjudicator ever time and everytime I get the same response. ‘They are authorised to deal with the complaint’ which tells you nothing. However the last guy I spoke to said he was level 4 qualified and used to be an IFA. He said that being qualified to at least level 4 was now part of the recruitment process. And guess what ….. He found in our favour. Common sense!

    • Hear hear !!!

      Probably the most important question to ask

  14. Compliance Thought 7th August 2015 at 4:25 pm

    What nobody seems to have asked is why ‘Sid’ thought transferring this client to a SIPP to make his own investment purchases was suitable in the first place. Just because an individual is a doctor, has a property portfolio of £2M and is in the NHS pension scheme, does not mean he has any knowledge on investments or pensions.

  15. John Hutton-Attenborough 7th August 2015 at 4:35 pm

    MIB – case reference number please. Need it for our own IC procedure!

  16. This case should be brought to the attention of the TSC.

  17. What could the TSC do about it? It has no powers.

  18. So slightly unrelated but I think it has relevance. This morning I Ran my pro bono clinic at the local CAB. All three slots were occupied by people wanting to access their pensions under the new ‘freedoms’.

    I only give the proverbial guidance in these sessions, no advice but I can honestly say that I would not have taken on any of these enquiries on a commercial/professional basis.

    Someone will and we’ll pay for it a few years down the line. It’s so obvious that a blind man could see it coming but in the meantime we’re watching an old Yes Minister episode over a glass of Vino to bring some sense of reality

  19. I had a case a few years ago (transfer to an IVPP) on which the ceding provider (Zurich) had sent the money to the receiving provider (L&G) without either the application form that I’d sent them to finish off, without informing me that they’d done so and with no indication as to the intermediary involved.

    L&G banked the cheque without making any enquiries of Zurich as to what it was for and then repeatedly denied having received it. Zurich confirmed to me that the cheque had cleared. Back to L&G. Another denial. I informed them that I knew they’d had the cheque because Zurich had confirmed that it had cleared. Ah. So why did you make no effort to contact Zurich? We don’t do that. So what would have happened next? We’d just return it after 30 days.

    I complained to Zurich and was fobbed off. I complained to L&G and was fobbed off. I referred both complaints to the FOS. The FOS duly wrote to both providers for their side of the story.

    Zurich just said We don’t complete other providers’ forms. The FOS rejected my complaint on the grounds that Zurich are under no obligation to complete other providers’ forms (which wasn’t the basis of my complaint).

    L&G lied to the FOS, claiming that they had contacted Zurich, but declined to explain why, having done so, they’d done nothing further. The FOS rejected my complaint on the grounds that L&G had told them that they had contacted Zurich (contrary to having told me that they hadn’t).

    I wrote back to the FOS asking why they’d made no effort to contact Zurich to check the veracity of L&G’s claim. My letter was ignored.

    Draw your own conclusions. Faith in the FOS? I have none.

  20. Here’s a brief one from a slightly different perspective, where I was hoping FOS would find in the consumer’s favour… I was contacted by a woman with a Scot Wid S226 policy that included a really good guaranteed annuity rate. She had been away travelling and had missed the warm-up letters and pre-retirement pack from Scot Widows. She returned just before her birthday (a Saturday). She returned the retirement forms on the Monday to arrange annuity on the GAR basis. Scottish Widows refused, and said the GARs were now not available because she had gone past the NRD (by one working day). Now, I know they had a right to do that contractually, but under “treating customers fairly” I thought that there should be a good case for saying that they should have honoured the rate. I think it’s disgusting that someone can make every payment on time every month for 20 years+ and then be refused a beneficial rate because of a delay of one working day. Of course, I was naive, because Scottish Widows refused to change its stance, and the FOS also found in their favour.

  21. I have a great deal of respect for Neil but the problem for Sid is one I have seen many times. Neil tells us, “The actual investment adviser the client used was not regulated”.

    From what Neil tells us, Sid knew that his client intended to act on unregulated advice with regard to the actual investment vehicle but facilitated it anyway.

    It is a bit like driving somebody you know is suicidal to Beachy Head and then saying “I didn’t push him, he jumped!”

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