27 Apr 2011
According to Panacea.com's FOS Survey poll results
The FOS is a strange being, it is there quite rightly to act as an arbitration service to resolve disputes where consumers are unhappy with the investigation outcome delivered by a firm in response to a complaint they have made. The recent PPI court case against the banks is a good example of positive actions taken by the FOS to deal with major institutional examples of miss selling when all else has failed.
But where it has all gone wrong, despite FOS denials, is that it is turning into an enthusiastic consumer champion in the eyes of very many IFAs and Providers alike. It is no longer being seen to investigate complaints fairly, on the basis of documentary evidence available and/or on the balance of probability with many IFAs expressing concern if not actual incredulity about some of the adjudication outcomes.
This is made worse because within this process, the FOS allows IFAs no affordable appeal process other than a judicial review against what are seen as flawed decisions. The complainant does have recourse to the courts, if they are unhappy with the outcome.
Can the IFA FOS experience really be as bad as some are suggesting, what is it that so many IFAs see as wrong in their processes and attitudes. To see what our IFA members thought, we commissioned the Panacea.com FOS survey that was completed between the 8th April and 26th April to gauge the feeling in the “Trenches”.
It has proved a most interesting yet strangely frightening exercise in having the blindingly obvious confirmed. We would stress that the survey may not be representative of all IFAs as it's just Panacea.com members who responded but it could prove to be a good guide.
What really stands out from over 300 members, who very kindly responded with such enthusiasm to the survey, is the huge number of added comments that really speak volumes. These would suggest that the FOS needs to look closely at what it does, how and why.
Alarm bells should be ringing very loudly for example when:
This is a timely survey given the MM report that seven financial services trade bodies are writing a joint letter to Treasury financial secretary Mark Hoban calling for the powers of the Financial Ombudsman Service to be curbed within the new regulatory structure.
IFAs take complaints seriously. Pretty much all small IFA firms take complaints very seriously indeed. Why? Well they care about serving their client’s best interests and rules dictate that they should. But more importantly, a complaint can often be taken (rightly or wrongly) as a personal affront when the file is reviewed (if they have one, see our IFA bulletin) as it is often the case that investigations will show that the complaint has been manufactured - a miss-sale is a miss-remember either with the benefit of hindsight or with the potential benefit of compensation being paid simply for “passing go” with a false claim!
An additional factor in the serious investigation of a complaint is that any compensation that the client may be seeking is coming from their own often fragile resources that frequently fall short of a gap fill that could be provided by any PI cover they hold.
A handful of complaints found against a small firm can spell financial ruin by way of compensation payments and FOS case fees. PI excesses are so high as to render such cover as a disaster option only because insurers can no longer keep pace with the damaging effect of retro regulation.
Worse still, PI insurers have a tendency to settle cases because it is cheaper to do so rather than fight what is often seen as a wrong FOS decision.
Now I want to be very clear on this; the FOS will no doubt defend its actions and cite very many cases where a client has no doubt been ‘miss-sold’. And I am sure they are right, but the level of successful complaints found against IFA firms is very small indeed and the system itself has become victim to a number of damaging and toxic aspects of the unexpected consequences of the complaint resolution processes.
It is a fact that many major financial institutions are unhappy with the FOS and often settle claims they should not because it is cheaper to do so and they do not want to be seen in a bad light by the public, FOS and FSA.
This sadly has the effect of raising the expectations of the more unscrupulous in society. Link this with a systemic failure to control opportunistic claim chasers both corporate and individual from exploiting a system that has no downside if you loose and you have complete madness in a system set up to protect and compensate consumers.
In short, many IFAs think the FOS has been hijacked by the compensation culture, with staff often seen as not well enough qualified or equipped by way of experience to deal with false or manufactured complaints, often submitted with plenty of froth and bubble but no actual evidence.
Unlike the PIA Ombudsman under the control of Sir Anthony Holland, it is not a requirement that FOS adjudicators hold industry qualifications, when asked by IFAs what qualifications an adjudicator holds there is often a point blank refusal to answer the question.
IFAs often wonder why FOS adjudicators cannot see a manufactured complaint when it sits on their face. This may be because adjudicators have targets, their remuneration and possibly their job could be affected by failure to hit targets.
The results have been given to Mark Garnier MP, a member of the TSC to provide a greater insight as to whether the FOS is really seen by IFAs as either a Consumer Champion or a fair and unbiased dispute resolution service in the eyes of those who's good name and livelihood are most affected by their actions?
The results will also be passed on to Association of British Insurers, AIFA, the British Bankers’ Association, the Building Societies Association, the Council of Mortgage Lenders, the Association of Financial Mutuals and the UK Cards Association as this matter is so serious as to warrant attention and action on their part too.
On your part, please feel free to Tweet, e mail a friend or colleague with the links on this page and in our bulletin.