Given the complex nature of many investment products, the volatility of markets, the predatory instincts of claim management companies and the gimme, gimme nature of modern society, it is quite likely that most firms will experience complaints which subsequently progress to the FOS. It is what happens when these complaints reach the FOS that concerns me and many other advisers.
Many readers are undoubtedly yawning at the thought of another tirade against the unfairness of the FOS but, hold on, this has implications for all firms. Aifa is doing a sterling job in fighting against the imbalance caused by the Financial Services and Markets Act which, lest you have forgotten or did not know, has resulted in advisers having fewer legal rights than terrorists or drug-runners.
One adviser pontificated that, on reading the submissions to the Hunt review, he now knew who his friends were. The submissions are certainly revealing and possibly reflect the attitude of the authors towards the adviser community.
The Association of Friendly Societies delivers a rational response which highlights many of the shortcomings that blight the FOS in terms of balance and neutrality. It considers that publishing adjudications might lead to consumer detriment and suggests that information provided within Ombudsman News works very well. It also suggests that vexatious cases need to be weeded out at an early stage to avoid case fees being charged.
The Association of British Insurers argues for an appeal route where cases have wider implications. Unfortunately, this does not go far enough as it fails to provide for appeals against individual decisions which have more of an impact on smaller firms than the behemoths within the ABI.
The financial impact of an upheld complaint can prove significant for a small firm while ABI members are able to dip into policyholders’ and/or shareholders’ funds to meet compensation and associated costs. This is also why they can make small “compensation” payments rather than investigate the basis of a complaint.
The ABI also rails at the lack of consistency within adjudications and proposes that the FOS should become a division of the FSA, which many advisers already believe to be the case. Unsurprisingly, it comes out against providing detailed information on the numbers of com-plaints against its members. This is one area where most advisers line up with the consumer lobby in favour of detailed complaint analysis.
Aviva considers that FOS processes should remain distinct from legal procedures, arguing that such a move would add layers of bureaucracy and cause delays. This argument has been used by a number of respondents and epitomises the flawed view that speed and access is somehow of greater importance than justice.
IFAs generate the bulk of financial services business but attract only 12 per cent of the complaints which progress to the FOS. These statistics should inform the review and highlight the reality that most complaints concern the bancassurers and direct salesforces.
Aifa desires a small firms unit within the FOS, which is not unreasonable, given that there is already a unit dedicated to complaints made through MPs.
Barclays reasons that an independent appeal panel would lend itself to increased confidence and also expresses concern at instances of inconsistency.
David Severn is vehement that the FOS should remain free to complainants and should not align its processes with those of the legal system. Without doubt, there will be many firms rejoicing that he is no longer at Aifa.
Which? is its usual strident self, articulating its belief that an appeal system for firms would “undermine the fundamental principle of the FOS”. This, presumably, being the principle that the industry can afford to fund the costs of investigating opportunistic complaints and also suffer the financial consequences of irrational adjudications. Which? also finds against the concept of charging small fees to unsuccessful claimants.
The one consistent theme within the submissions is how to engage with vulnerable groups. My fear is that in the coming years advisers will constitute an unhealthily large percentage of such an assembly.
Alan Lakey is a partner at Highclere Financial Services