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Sense of justice

The recent court case involving a firm of advisers and the Financial Ombudsman Service has swivelled the spotlight back to the injustice and fundamental unfairness of the dispute resolution system under which firms labour.

The case revolved around the firm’s unwillingness to pay £1,440 in case fees for four complaints which were not upheld.

The court sided with the firm and described the current situation as “unfair in principle and in practice”, something that advisers have been arguing for years. The judge further stated that “no reasonable public body would maintain and enforce such a rule”. Again, advisers have long realised that the FOS is not a reasonable public body.

Lest we forget, complaining, particularly about a mortgage endowment, has been the fastest-growing national pastime over the past seven years, way ahead of the latest exciting instalment of Big Brother. Via the FOS, it has provided a legalised platform for opportunists to extricate funds from institutions and advisers on one pretext or another.

Unsuccessful complainants are able, at no cost, to escalate the complaint to the FOS, where they are subject to the FOS’s perception of “natural justice” and its capacity to “unashamedly make new law”.

This in itself is great cause for concern but the court case revolved around the precept of whether an innocent party should fund its own investigation, particularly when the infor-mation enabling a rejection was available to the FOS prior to opening a case file.

The judge thought otherwise and costs and expenses of £2,822 were awarded against the FOS. As with any pseudo-regul-atory body, it is able to pay this without compunction as it is entirely financed by the industry, which means that we all pay, whatever the outcome.

The FOS plans to appeal this decision – an option, incidentally, which firms are denied when faced with ombudsman decisions against them and this may very well result in further costs being awarded against the FOS. Of course, such profligate use of funds is easy when it is other people’s money.

Regardless of the outcome of this appeal, I am sure that all advisers and rational bystanders will applaud Brian and Dolly Pickering for standing up to the FOS and refusing to be cowed by threats and the battalion of legal advisersIt is now more appropriate than ever for the FOS to be covered by the Freedom of Information Act. It is bizarre that the FSA is subject to the Act while the FOS, which derives its powers from the FSA, remains exempt.

The first post-RDR stirrings from the FSA have emerged and suggest that advisers’ fears were well founded. Within the FSA business plan, we are told that “in line with feedback”, it intends looking more closely at the primary advice nonsense espoused within the RDR as well as customer agreed remuneration. Despite the weasel words, it suggests that the RDR is indeed a done deal.

Years ago, I was involved with saving a primary school which the local education authority was proposing to close. The LEA held a “consultation evening”, where everyone could have their say and the LEA would take note and give serious consideration to the counterarguments. Guess how surprised I was when the LEA responded with a decision to proceed with closure.

Like the LEA, the FSA may have underestimated the opposition to changes which threaten to destabilise the adviser/client advice process, with devastating results for both consumers and the majority of whole of market advisers.

Despite the massed ranks at County Hall, the school was saved and I defy the FSA to implement changes to the advice process that will result in the financial disenfranchisement of millions of consumers and the loss of thousands of adviser jobs.

I am assured by many that the proposals will never go ahead as they fail to comply with Mifid. I hope so, otherwise posterity may remember Hector Sants as the Nero of the financial services world, remembered with disdain in much the same way as those entrepreneurs Maxwell, Deaves and Levitt. Incidentally, my thesaurus advises that opportunist is a synonym for entrepreneur.

Alan Lakey is partner of Highclere Financial Services

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