Being a cynic means never having to be disappointed (apologies to Love Story)


Being a cynic means never having to be disappointed (apologies to Love Story)

The wisdom of operating this mindset was further ratified upon reading the FAMR Final Report. The aspect that most interested me was how the carefully selected panel dignitaries (comprised mainly of theorists) would deal with the persisting issue of the 15-year longstop.

For those whose memory fails them let me remind that this legitimate defence of stale claims, one that other firms and individuals are fully able to rely upon, was summarily removed when the FSA set out the Ombudsman operational rules. Parliament did not discuss or debate the matter and consequently did not vote on its removal. In fact, most MPs remain unaware that this legal defence has been removed and are shocked when told. The FSA’s legal counsel stated that in his opinion it was Parliament’s intention that the 15-year longstop be removed from financial services. When asked for sight of this legal opinion the regulator refused, and continues to do so to this day.

I and a number of others responded to the FAMR ‘consultation’, hoping that for once it might disprove the notion that respondents’ are treated with contempt. However, the rational explanations of why financial services should not be singled out for this loss of human rights fell on deaf ears, or maybe they were listening to the siren voices of the FCA Consumer panel, which was nicely represented on the committee.

As with the sham RDR consultations the FAMR determinations are couched in weasel words where we are assured that the “FAMR is sympathetic to firms’ concerns” and are told why the loss of the longstop must be maintained. Apparently only 216 complaints that reach the Ombudsman fall outside a 15-year period and only 30% (64) of these are upheld.

We are again treated to the view that the financial services industry is a special case and that the long-term nature of advice, blah, blah. Architects, surveyors, builders, politicians, regulators and many other occupations provide advice or services where a negative outcome could eventuate more than 15 years later. In fact, with politicians and regulators it is a fact that most of their decisions end badly.

This is life, things go wrong. The courts and the politicians decided thirty years back that 15 years represented an appropriate balance between the obligations of firms and the rights of customers yet the FSA/FCA is apparently wiser than either Parliament or the judiciary.

When we analyse the FOS complaints figures we find a few interesting matters. Most mortgage endowment cases are now time-barred or had compensation paid so their relevance is waning. Products like SIPPS are relatively new in terms of their take up and long-term care plans have been out of favour for many years so the FOS figures actually mislead. The FOS has a huge budget for advertising, or ‘outreach’ as it prefers to describe it. They will say that they are raising awareness of their service, others might reasonably suggest they are advertising for new business.

The FAMR final report also suggests that the current 3 and 6 year rules serve the industry okay. This is palpably untrue. The rules state that a complaint cannot be levelled more than 6 years after the event complained of or, if later, 3 years from the point at which the complainant knew or ought reasonably to have known that there was a problem.

All well and good except that it is the FOS that determines what “ought reasonably to have realised” means and how this elastic concept is applied. I know of mortgage endowment cases where an insurer has written to a policyholder advising that his plan is off course and that remedial action is required to bring it back on course. You might think such a letter sufficient to trigger, in a reasonable person’s mind, the need to review matters or, if appropriate, make a complaint. The FOS believes otherwise and the 3-year rule is actually a variable time-frame that can be indefinitely extended at the FOS’s discretion.

What about Statutory Instrument 2326 which the Treasury introduced in 2001. This was introduced to ensure that the FOS would use pre 2001 rules when determining complaints regarding pre 2001 advice, so that old complaints would not suffer the new rules and determinations. The FOS ignores SI2326 in every instance, a clear case of an unelected quango treating Parliament (and the industry) with contempt.

Finally, let’s scrutinise the mendacious suggestion on page 58 of the report that financial advisers are joined in their loss of rights by doctors, accountants and solicitors.

Only six accountancy bodies operate a complaints service and, unlike advisers, anybody is allowed to trade as an accountant. Non-body members do not have to operate a complaints system. However, even those accountants who do operate such a system do not have to deal with negligence complaints because these are not covered and have to be dealt with through the courts.

Similarly, with solicitors, where allegations of misconduct must be levelled within 6 months. In other words, they have a 6-month longstop.

The General Medical Council can only look at complaints made within 5 years of the event (a 5-year longstop) so any linkage between these professions and advisers is at best tenuous and, most likely, duplicitous.

In short, the report has solidified the suspicions of many advisers that it was a done deal way before the call for evidence and that we are dealing with a venal organisation intent on forcing its uninformed views on a section of society too disparate to fight back in any meaningful way.

APFA is shackled by its inadequate finances and the fear of rocking the boat. Unless the industry stands together and unites behind a figure, such as Garry Heath, then we probably deserve to be treated with contempt because, as history tells, anything worth having has to be fought for.

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