Still ‘Pete Tong’ at the FOS?

From the 7th July to 12th August this year, we conducted a survey amongst financial advisers asking them for their experiences of the Financial Ombudsman Service, its perceived fairness and how the overall complaint system could be amended in order to deliver greater efficiencies and fairness.

The survey received 183 individual respondents as well as a host of comments on each individual question, which meant the final survey report runs to 28 pages, showing the depth of feeling amongst the adviser community. We have provided a selection of comments with each question below to give a flavour of adviser sentiment on this topic.

Panacea has shared a copy of the results with Caroline Wayman, the new FOS boss, Mark Garnier MP, Andrew Tyrie MP, Martin Wheatley, Keith Richards, Chris Hannant and Otto Thoreson.

As a comparison we have also included the result summary of the 2011 FOS survey – most of the questions were asked in both iterations of the survey; be aware that no ‘Unsure’ option was offered in 2011, it was for 2014.

The 2011 survey, a pre-RDR, pre-FCA period, showed that something was seriously wrong with a system that was meant to be fair, open and honest, and where complaints that firms could not resolve were considered in an unbiased fashion based upon the evidence available and/or the balance of probability.

The time seemed right to revisit this survey as we now have a re-branded, re-managed regulator in place and a new boss at the FOS since Ms Ceeney resigned in November 2013 to join HSBC as head of its customer services.

The hoped for outcome of this exercise is that there is a recognition by both regulators and politicians that all is still not as well as it should be at the FOS and that something must be done to restore confidence in a system that so many see as wrong. And that view, we are sure, is not limited to the adviser community in isolation or just to do with the lack of longstop protection.

Consumers absolutely have rights that should be strongly protected, but in doing so the adviser consensus seems to be that those rights would appear to be taking precedent over everything else. Even, very worryingly it seems, to the point that if a consumer complaint is not possible to uphold on the basis of evidence available and/or probability, another way is found. And in some cases, if this survey’s anecdotal evidence is to be believed, this means the FOS re-engineering a complaint to create a successful one that the client did not make in the first place or had any issue with.

Confidence in a fair and unbiased Ombudsman service is vital and the right of all who use or engage with the service, the complainant and those complained about.

There is much concern both inside and outside the industry about the restoration of consumer trust and we agree that much still needs to be done.

We hope the positives can be taken from this survey may cause a pause for thought because right now many in the advisory community see that very little has changed since 2011 and part of that restoration of trust is to ensure that the ombudsman service is seen as as a neutral body and not an arm of the regulator that champions the consumer at all cost.

A particularly disturbing trend was the increase to the already large 2011 percentage (64%) of firms who had experienced false or manufactured accusations from complainants in an attempt to gain compensation?

This year that stands at 74%.

Comments from advisers on the question:

“When I suggested [the false claimant] should be sued for fraud I was told this would be ‘bad for the industry’s image’. It’s funny how the same standard doesn’t apply to  making false declarations on insurance applications.”

“In all claims to date both the client and the claims company have made blatantly fraudulent claims.”

“The adjudicator just accepted at face value the complaint from the ex-client, who produced no evidence to back up their complaint.”

Panacea Observations:

 “This is a frightening statistic and it does little in the support department for regaining trust in the industry if you are fighting a battle to see trustworthy behaviour from your clients. The ability for some consumers to lie knows no bounds it seems. In my own experiences I have seen this, with one particular example being a client who happened to be in a very senior position with the FSA at the time the complaint was made; when ‘memories’ were refreshed the complaint was dropped but the process was very stressful, something not understood by those who regulate. And stress is a big part of any complaint resolution process, for both sides. It is worsened however for the adviser firm when the complaint is simply and clearly a fabrication that could be recognised very quickly in the adjudication process but for some reasons often fails to be.”

Click here to download, free, the full survey results with all the comments.

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Setting the record straight, with John Warburton, Executive Director, Distribution, Prudential

We face a ‘new paradigm’ for financial planning and retirement provision, according to Prudential’s executive director, distribution, John Warburton, who believes George Osborne’s Budget announcements very much suit the insurance giant over the medium to long term.

“Our priority this year is to continue developing our product propositions even further in response to those [Budget] changes so that we can give advisers a wider range of flexible solutions that suit the post-April 2015 world.

“You shouldn’t see any major change in strategy or direction from Prudential to that which had already led to our strong performance – focusing on providing risk-managed solutions that give customers choice when it comes to them drawing their income for retirement.”

Warburton says the group has done this by focusing on its core assets – the Prudential brand, its financial strength and a multi-asset investment capability that holds risk management at its core.

“We have always based our product range around providing guarantees and longevity risk management. The new freedom and flexibility that the Budget introduced means our approach has never been more appropriate,” he adds.

Warburton foresees an escalating level of product innovation across the industry – due in part to the Budget but also in response to a growing demand for more flexible financial planning and at-retirement solutions.

He says the advent of the New ISA (or Nisa) together with drawdown products will become more attractive as demand from consumers and advisers grows, while the need for alternatives to annuities will drive innovation – both from Prudential and the broader industry.

Advisers can feel reassured they will receive the same level of dedicated support when navigating the inevitable industry changes that the Budget will spur, as they received during their RDR journey.

“We felt we were particularly successful at supporting advisers around the RDR and the feedback we have had echoes this. We invested a lot of time and effort in supporting them through that level of change and we would expect to deploy the same level of resources in this instance, leveraging our capabilities to help advisers.”

He says the extensive programme of training and information – available largely through its adviser extranet www.pruadviser.co.uk – ensures that from a technical perspective and through its scenario-based modelling tools, advisers should be suitably armed to face the changing distribution landscape. This is also underpinned by Prudential’s account management, business development and business consultancy services that are available to financial advisers.

Warburton stands by the company’s decision not to invest in its own fund platform, failing to see a viable business case at this point. Rather, he urges advisers to ‘watch this space’ for wider availability of Pru’s multi-asset investment propositions, as they are listed on more third party platforms over the second half of the year.

Warburton says the new world should be viewed as a broader opportunity set for an adviser rather than posing a threat.

“We are very bullish about the adviser market in general, witnessing a transfer of responsibility from the state and employers to the individual taking on a greater responsibility for their own long-term financial needs, and taking on more risk to their own personal balance sheets,” he adds.

Even against a backdrop of increased direct-to-consumer activity and a potentially more complex distribution landscape for advisers to wade through, Warburton feels strongly that a greater financial awareness will only help grow “the overall size of the advice market”.

“Our expectation is that, as levels of consumer understanding of the challenges they face rise, and their interest and awareness is piqued, what will really be needed and valued is full professional financial planning.”

Sam Shaw, Freelance Journalist