15th September 2010

"We are not like a court" - FOS

For some time IFAs have felt that the FOS has lost it's direction and acting more as a Consumer champion, no longer investigating complaints from a position of neutrality, in a fair and reasonable way based upon the complaint at hand, the evidence available and/or the balance of probability.

IFA Richard Afton of London-based Cedar House Financial Services is, as reported in FT Adviser some £11,123 worse off today after the FOS investigated advice given to a client who had not complained about the advice given over a pension transfer, but had complained that the IFA had not disclosed the Commission.

It was reported that Cedar House rejected the complaint but offered to rebate some £1186 as Standard Life had paid "too much" commission. The client was not satisfied and so took the case to the FOS in March this year who found that "Mr. Kafton had failed to make them aware of the charge that would be levied on the SIPP or the level of commission the firm would receive for arranging the SIPP."

The adjudicator noted in his response to the firm "Having considered the file papers, I have concerns about the suitability of the advice itself to transfer into the SIPP. I will therefore consider whether the advice to transfer could be regarded as unsuitable. If I conclude that it was unsuitable then the issue of whether Mr. Kafton failed to adequately disclose the charge and commission involved in the transaction becomes immaterial."

All IFAs should be aware that the FOS seem to have an operational remit that can change in an almost Chameleon like way. This is potentially very dangerous. IFAs should work to the rules laid down and if they do not, expect to be punished, but when an Ombudsman states the following, "Our inquisitorial role allows us to consider matters beyond the specific complaint made by the consumer or if we think it is right to do so.

Consumers do not generally have the same level of financial knowledge as the firm they complain about and may not consider there is an issue about suitability when they complain. This lack of knowledge should not be to the consumer's detriment if it is clear they received unsuitable advice"; we have entered the world of retrospective investigation that is of course not subject to any "Long Stop" protection either.

A spokesman for the FOS is reported in FT Adviser as saying "We are not like a court. We do not just look at how an argument is presented but look at the underlying facts. Otherwise it would only be for those who are most articulate in their complaints."

Too right, they are not like a court- but should be. The now defunct office of PIA Ombudsman, headed by Sir Anthony Holland, held the view that any complaint made should be subject to the basic principles of law, that a complaint should be investigated fairly upon the evidence available or balance of probability. It is not the role of an Ombudsman to set about creating a complaint where there was none. In addition, the FOS and it's operational remit- given to it by the FSA, has some very serious Human Rights Act issues that it is felt should be challenged.

IFA Simon Hall is quoted as saying "The Financial Ombudsman has the benefit of hindsight, it is easy to work out if someone has made less profit after the event, much harder before it has happened.

Another IFA commented "We would expect all persons regulated both past and present to have a fair hearing under the law, the law expects it too"!!

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