Amilestone was passed recently when proposals for a fairer compensation scheme were published by the FSA. This was a matter of highest importance to Aifa members and saw us lobby vigorously to bring about change. The time is now right to address reform of the Financial Ombudsman Scheme.
There are few matters which excite more member comments than the ombudsman. My postbag bulges with comments from members asking some fundamental questions about scope, jurisdiction, focus and fees. It is time to examine the situation.
Every good firm wants to see an ombudsman service that is fair, focused on dispute resolution and as wise as Solomon. There is much to commend the way FOS operates currently but there are other areas where the opportunity to stand back and review the scheme would help all parties and give rise to a system which puts consumer interests at the heart of dispute resolution but is still fair to firms.
Let us think about money for a moment. My own view is that the annual levy paid by all firms should be kept to a minimum and the vast majority of ombudsman costs should be picked up by those who use its services. That would mean that those who use it most, pay most.
Second, those who have complaints that go against them should pay the fees and those who are found to have done nothing wrong should face no fee. Again, that seems reasonable.
Perhaps one of the biggest challenges to the FOS’s authority has been the activities of claims management firms. The unscrupulous marketing activity undertaken by some of these firms has driven a significant number of complaints. Aifa achieved considerable success lobbying for the regulation of these firms. The new regulatory structure comes into effect this month and will put an end to bad practices and impose the type of pro-active regulatory regime we are more familiar with. There is no doubt we will see complaint management firms leave the sector as a result. We were intimately involved in pushing for regulation and our work on the advisory panel that sets the new standards will see further improvements.
Ideally, we would like to see the FOS set up a small businesses unit, rather like that of the FSA, which can focus on the particular needs of IFA businesses, which get fewer complaints but tend to be more specialist. This unit would be staffed by experienced people better able to grapple with the complexity of IFA cases. To go a stage further, the unit would take oral evidence from the parties involved in order to flesh out the case and be fair on all parties.
These may seem like radical proposals but are designed to bring about a system that is fairer to consumers and firms alike.
Finally, I would call on FOS to publish a list of the most frequently complained about companies. I would not expect to see an IFA anywhere near that list and it would help dispel this myth that IFA firms cause the FOS’s workload. If cultural change is to be achieved, there are many levers to be pulled but hitting a plc’s share price is by far the best.
Chris Cummings is director general of Aifa.