25th October 2010

Liar, liar!

I never cease to be amazed at the sheer near criminal audacity of some people who purport to have been miss-sold some 20 years or so after the event.

We all are aware that the ease at which it is possible to make frivolous and vexatious complaints to the FOS or the FSCS leaves much to be desired, but two examples that have recently come to my attention - not anecdotal, beggar belief.

1. The client of a retired IFA had made a complaint to the FOS that he had been miss-sold an endowment policy almost 20 years ago. The format of the complaint was of the usual "cut and paste" variety and had nothing tangible to support the allegations made.
   Upon reference to a file by the IFA, thankfully retained, it became clear that the advice given was in direct response to a request to effect a top up endowment policy as a result of an increase in a mortgage that had already been arranged by the client himself. The client had specifically wanted a WP policy with the company that had the best combination of low premium and very good past performance record. Standard Life were recommended and documented accordingly.
   The complaint was dealt with on the IFA firm's behalf by Tenet, who were the firms compliance advisers at the time. They concluded that the complaint was without merit and dismissed with the usual caveats and presentation of evidence to support the findings.
   The retired IFA was sadly not surprised to see the client take the complaint to the FOS as he was not happy with Tenet's findings. The complaint when submitted had been further and falsely embellished, now claiming that the IFA had advised on the mortgage. It was also disclosed in the FOS submission that the complainant had received a "windfall" payment.
   As a result, the case then became within jurisdiction and a case fee triggered.
   
2. A complaint is made to the FSCS by a disgruntled "client" of a retired IFA sole trader. The FSCS indicated that the level of possible liability is in the region of �£2,000 and if the "pensioner" IFA did not have sufficient resources to meet this claim then he should complete an Assets and Liability statement and eventually, when/if declared in default the FSCS will investigate and pay the claim.
   The retired IFA had his suspicions about the quality of the claim when he recognised that the "aggrieved consumer" was indeed an individual who worked as an adviser for him in the mid 1990's and that the policy being complained about was one the ex staffer had advised upon and effected himself. It transpired that the complainant, after a stint with Openwork, had left the industry in 2007, and knowing that the IFA was now retired thought he would try on a claim for bad advice hoping that the retired IFA's firm was in FSCS default and "trouser" �£2000 for passing go. The FSCS upon hearing this immediately rejected the claim, noting that the complainant had lied on the form submitted by not confirming he had industry experience.

Although many may think this is small beer, for those IFAs that are now retired, and with an unblemished record, such complaints are costly both in financial, emotional and time-consuming terms. Remember, this could be you in 20 years time!

Under UK law, all businesses and commercial activities should enjoy the protection of the longstop, set out in the Limitations Act 1980 even IFAs. The IFAs in question here retired under the jurisdiction of the PIA yet find themselves being judged by the FOS. The PIA recognised the longstop, the FOS choose not to.

The message here is clear and should be heeded by all - those entering the industry as well as those retiring and leaving it. The fight to re-instate the longstop protection is the number one issue for IFAs and the AIFA. Its removal is a travesty of justice, an affront to IFA human rights and a shining example of one of the most pernicious aspects of poorly thought out regulation today. Until it is re-instated, no IFA, regardless of their firms remuneration structure or corporate liability status, can ever retire without fear of a ticking, retrospectively fused time bomb.

Regulation, FSA/FCA