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Proof is in the pudding

The figures say it all really. IFAs are responsible for just 3 per cent of complaints to the FOS and only 33 per cent of those are upheld. Banks on the other hand are responsible for 59 per cent of complaints and a whopping 69 per cent are upheld.

So someone remind me why it’s the IFA sector that lacks consumer confidence?

After a lot of digging by Money Marketing the FOS gave us uphold rates for 2008/09. It upheld 69 per cent of bank complaints in the last year, more than double the 33 per cent upheld against advisers.

The uphold rate for life insurance/investment product providers was 36 per cent and 45 per cent for both fund managers and stockbrokers respectively.

Yes, you could say that the banks had a higher number of cases upheld because of PPI complaints, which skyrocketed in the last year. But there are also large numbers of banking complaints, such as the recent misselling of the Aviva global balanced income fund by Barclays, that are yet to reach their peak at the ombudsman.

In his chief ombudsman’s report, Walter Merricks says uphold rates over the past eight years have averaged 30-40 per cent.

He says: “We would normally expect only a minority of the complaints referred to us to turn out to have been justified, as is the case with independent financial advisers.”

The House of Lords Economic Affairs Committee this week labeled Financial Services Compensation Scheme levies “unfair” and called for calculations to be based on firms’ levels of risk, rather than their size.

It wants banks to pay a greater proportion of the cost of the FSCS because they take greater risks. Evidently they have pretty ordinary complaints handling practices too.
How do you think the costs to the industry should be calculated so it’s fairly split between sectors? Should advisers be rewarded when complaints and uphold rates are low? If so, how?

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Comments

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

  1. Who pays and who is regulated
    I am already aware about the statistics for complaints and yet I still always wonder why it is still the IFA sector that pays the bulk of the FSA’s costs and it is the IFA sector that is most closely regulated. Somewhat strange when we find our counrty in the state it is currently in dont you think?

  2. Claimants must pay
    If there is to be balance, the ‘fair and reasonable’ authority of the FOS cannot be respected unless claimants are filtered out by way of payment of a fee, in the case of claims handlers they should pay. The fee should be at least £200, a similar sum is required before a local authority will investigate a complaint about a ‘high hedge’ for goodness sake. IFAs suffer from high hurdles, dar too high for sole traders. Please make it fair Mr Merricks, if you have a soul.

  3. Complaints against IFAs
    Why is anyone surprised at these statistics? Banks and Building Socs. principally operate to sell a product, not to satisfy a need. The insuring and investing public should be made aware of these statistics so that they can make an informed decision as to where they are most likely to obtain impartial and considered advice.

  4. Julian Stevens 3rd June 2009 at 4:49 pm

    Proof is in the pudding
    It’s easy ~ the IFA sector should only have to pay a share of the total FOS levy proportionate to the percentage of all upheld complaints for which we are responsible. The result of this would (and should) be that the FOS levy payable by each and every IFA would fall to relatively trifling levels. What possible justification can there be for any other methodology?

  5. Philip Curnow 3rd June 2009 at 5:27 pm

    Proof of the Pudding
    I am sure that I am not going to be the only person who suggests that the reason IFAs pay too much and the big banks and direct insurance sellers get away with far too little is that IFAs don’t have the huge lobbying budgets and political connections that Banks, etc. enjoy. It is not just corrupt MPs who need to have new transparency thrust upon them – it is about time that all of those who ruled our lives were subject to public scrutiny.

  6. Stephen Reynolds 3rd June 2009 at 6:00 pm

    Proof of the pudding
    I have to advise mortgage clients that under dual pricing, they might get a more competitive deal by going direct to a product provider, i hop ethe FSA now gives guidance to product providers that they are less likely to have a complaint and that theya re less likely to have to refer to the ombudsman if they use an IFA !!!!!!!

  7. Proof is in the pudding
    Why is anyone surprised with these figures. The IFA / small business sector is HIGHLY REGULATED compared to its complaints but of course, the banking / insurance industry makes up a large proportion of the FSA’s senior staff. Do you really think that they will tightly regulate their ‘mates’? Also when it comes to charging fees, these are disproportionate to the claims with IFAs & Mortgage advisers paying far too much compared with the ‘RISKY BANKS’. But!!!! let the FSA look after their mates, after all, they too will someday join the FSA to tightly regulate the IFA. Remember the vast bonuses they just paid themselves after presiding over the bankrupsy of our country, was this for a ‘job well done’, no! it is a hangover from when they were employed in the banking / insurance sector and manipulated large bonuses. How can anyone justify these bonuses after a poor job done? And REMEMBER their refusal to name the Insurance companies who have admitted to them that the were not charging enough premium to customers for an endowment to ever be able to repay a mortgage? And REMEMBER presiding over NDL who was failing and their members who are owed £2m in comissions? Just who are they looking after? The public, the Financial Services industry or (yep!) themselves and their banking & insurance cronies. Please tell me I am wrong?

  8. TCF
    For three years or so we have suffered the repetitive rapproachment that we are not treating our customers fairly. The evidence from recent FOS statistics highlights a completely different picture. IFA’s always receive a far higher vote of confidence than banks and life offices and you cannot argue with facts. Remind me, which model is broken?

  9. Prrof is in the pudding
    As always, Julian Stevens has hit the nail right on the head. If this system is to stay in place the fees should be commensurate to the level of complaints received. Any other way of dealing is not equitable nor is it treating us (the FSA’s customers) fairly. As someone who has normally voted to the left I can only say bring on the General Election and perhaps we will get rid of the current expensive bureaucracy in and around Canary Wharf.

  10. Proof is in the pudding
    The problem with the Banks and Building Societies is that they are target driven and staff working for these organisations are usually paid part of the salary on the results they achieve. Targets cause miss selling. IFA’s and Mortgage Brokers work on recommendations and will only be recommended if they provide excellent advice coupled with excellent service.
    The majority of IFA’s and Mortgage Brokers really care about their clients hence the low amount of complaints.

  11. PRO BANKING FSA NOW CLEAR FOR ALL TO SEE
    IFA’s ~ 80% of the distribution, 3% of all complaints referred to the FOS. Uphold rates just 33%. Banks ~ 26% of distribution, 59% of all complaints referred to the FOS. Uphold rates 69%. Of the 3% IFA complaints 2.1% were dismissed bringing the total of upheld complaints for IFA’s down to just 0.9%. This is all the more remarkable when you consider that in 2005 the FSA representation to the Treasury Select Committee showed that IFA’s generated 80% of financial service distribution!

    In light of these figures how much longer will the Pro Banking FSA be allowed to conspire to destroy independent financial advice?

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