Is it all still ‘Pete Tong’ at the FOS in 2018?

Since 2011 we have been conducting research via a simple survey to gauge what advisers think about service levels and standards delivered by the FOS, in particular looking at their processes and the fairness of the system.

The first survey ran in 2011, then 2014 and finally, our last was in 2016, with the same questions.

A particularly disturbing trend was the increase of firms who had experienced false or manufactured accusations from complainants in an attempt to gain compensation, which went up from an already large 64% in 2011 to 74% in 2014.  

2016 continued to show a consistent negativity of experience.

So, what does 2018 look like?

Another two years have passed, and we want to know, will 2018 see any improvement on the:

  • 71% of advisers that felt FOS adjudications are unfair?
  • 69% of advisers that felt adjudicators help create complaints where no complaint existed?
  • 85% of advisers that felt FOS rules place an adviser or firm in a ‘guilty until proven innocent’ position from outset?

FOS Review

Channel 4 ‘Dispatches’ itself tackled the FOS earlier this year, painting a rather bleak picture of operations. As a result of the programme, FOS Boss Caroline Wayman has launched a review so it could “better understand and address the concerns” raised by Dispatches. This will be reported to Parliament shortly before summer recess.

Hopefully our survey, which will be shared with the FOS and Nicky Morgan (Chair of the TSC), will prove timely, and for Ms. Wayman provide a view of the FOS from an adviser perspective. And the industry itself can ponder if things have got better or not since 2011, 2014 and 2016.

Please complete the anonymous, 5-minute survey below and share it with your colleagues.

Your input is important, vital and greatly appreciated.

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.

What do the FOS, schools and NHS have in common?

Well, if recent reports and our survey results last year are to believed the common ground is that people lie to gain advantages that are not theirs to have.

This is a damning indictment of UKplc today. It demonstrates very clearly that if you do not qualify for something that is not by right yours, a simple little ‘white lie’ will see (that brilliant regu-phrase) a ‘positive’ outcome.

What is a positive outcome for one is a detrimental outcome for others.

The NHS has highlighted the fact that valuable resource could be saved if free prescription entitlements were more closely monitored. The somewhat archaic process of checking a box with a pen on a prescription form followed by a squiggle will result in £237m of free medication for so many beggars belief.

The NHS has form in this area. That is why so many overseas health tourists have taken the UKplc for a ride over the years. Foreign visitors and short-term migrants cost the NHS £2billion a year, an official report warned in 2013 and only around 16 per cent of the money was clawed back.

UKplc is it would seem, far too polite to question entitlements to state benefits. NHS frontline workers and pharmacists are not wishing to be involved in a few simple checks to determine entitlement because they do not see it as their responsibility.

Top state schools are having a problem too. It would seem that their popularity has seen potential student’s parents claiming postcode residency rights that they simply do not have, just to get little ‘Wayne or Waynetta’ into the school of their choice. The result is that hundreds of children have been banned from the state schools of their choice because their parents simply cheated the system to win them a place.

This is not fair on those who do have the postcode good fortune and I am pleased that at last some parents are paying the price for lying.

Now this brings me nicely on to the FOS.

Our 2011 and 2014 surveys found that adviser firms had experienced very high levels of fraudulent attempts at getting compensation. 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? In 2014 it stands at 74%. The ambulance chasing section of the legal profession has not helped this situation.

If trust is to be restored in the financial services industry professional practices and moral standards, this should be matched by an injection of cynicism by the FOS.

A firm should not be treated as an “Operation Yew Tree’ suspect by the FOS where the complainant is seen to automatically be believed. Maybe that is why they need so much more office space.

We note that in November, both Mark Garnier MP and Caroline Wayman, the new FOS boss made reference to our survey in a Treasury Select Committee meeting. With 2015 well and truly here, perhaps Ms Wayman could start to act on some of our findings before even more damage is done to the industry with compensation being paid and reputations damaged when they simply should not have been.

Investigations should be based on facts not he said/ she said fishing expeditions.

And that brings me back to the NHS.

It will take until 2018 for a computer system to be available to dispensing chemists to do the appropriate checks on free prescription eligibility. In the meantime what is wrong with these outlets and indeed hospitals doing a few simple checks themselves?

This is common practice in many European countries. In Spain for example, you can forget about free treatment unless you carry an NHS card.

More requests for proof are made at a supermarket checkout to buy a bottle of wine than are asked at a chemist to fulfill a prescription order.

More time is spent on ensuring you can only buy one pack of ‘paracetomol’ so that you do not overdose yourself than on checking if someone is entitled to sometimes thousands of pounds worth of free drugs.

For financial advisers, the money laundering checks for a small ISA investment are more rigorous than check made by the NHS who are about to deliver thousands of pounds of free treatment to somebody not entitled to it.

Madness, and it’s only January.

Miracles happen, or is it just wishful thinking?

The restoration of trust in the industry is vital for its success going forward. But trust works both ways. Firms should have trust in the regulator and the regulatory process that should be nurtured by a mixture of clarity, fairness and pragmatism.

Ombudsman decisions should be based upon the evidence available and/or the balance of probability. They should not be based on ‘coulda, woulda, shoulda’. This survey, exactly like the one we did in 2011, makes it clear that ‘creative Ombudsmanning’ is still at work and that is not fair. Until firms have confidence in a consistency of fairness of adjudications and clear evidence of impartiality, an unobstructed path to regaining trust is just not there.

Ombudsman decisions should reflect the processes, rules and rigour that a previous, relevant and applicable Ombudsman would have to take in an adjudication process. Decisions increasingly seem to be made, if our survey is to be a guide, with the benefit of hindsight and an application of today’s regulatory expectations rather than the rules and standards of previous regulators like FIMBRA, PIA and the FSA. That does little to support the ethos of an Ombudsman’s role of being an independent resolver of disputes and again, little towards regaining trust in the industry.

Experience and understanding of the markets one regulates is vital to ensure good Ombudsman decisions. Is it not therefore, by default, important that those who adjudicate on complaints have an equal understanding and, even more importantly, extensive experience of what was accepted practice and regulation then, not what is now and work back?

Tony Holland, the PIA Ombudsman, ensured all his adjudicators had relevant industry standard qualifications, this rule also applied to himself. His recommendation to Walter Merricks to ensure this practice continued when taking on the FOS role was ignored.

To see so many advisers seeing fraudulent claims 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 would seem.

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/ should be recognised very quickly in the adjudication process but for some reasons often fails to be.

Grooming’ – a word not often applied to financial services.  70% of respondents have seen awards made for an event hat has not actually happened or has not been complained about. This is way too high. The FOS role should be to adjudicate on the balance of evidence available and/or probability. It is not a licence to ‘go fishing’. Although I have no evidence to support the view, some say that the FOS process is target driven; the more cases that find their way into the system means bonuses for those concerned. If that is true, again, this does not help restore trust in the industry.

This is effectively a form of commission?

We have seen changes to the employment tribunal rules where, amongst other measures, the claimant has to lodge £1,000, which they forfeit if the case is found against them. These new rules have seen a dramatic reduction in claims

The key to good adjudication is the evidence available; it is inconceivable that the UK justice system would have survived for so long if 86% of those in the ‘dock’ felt that the judge or jury had already made up their mind before hearing the evidence. In many FOS cases it would seem from the survey that evidence is secondary to the need to ensure the consumer is the winner. This is not a game of consumer winners, or losers, it is about the perception of both parties view of fairness of decision making.

The latest figures released revealed in regard to employment tribunal cost changes show that between 2012 and 2013 there was a 79% reduction in claims. I feel a similar outcome would occur if a liability deposit cost applied to FOS cases. That would also have the effect of reducing the regulatory cost of doing business that in turn could be passed back to the consumer.

Walter Merricks said, quite unashamedly, that at the FOS, ‘we make the law’. Link that to failure or inability to supply evidence by the claimant and instead of placing a firm in a strong position the exact opposite is achieved and it is no wonder advisers feel the system is unfair.

The long stop is such a contentious issue, it is also the case that the Ombudsman’s rules make it clear that any decision made should give consideration to the Ombudsman’s rules applicable at the time the advice was give. The ‘Merricks’ interpretation of the word ‘consideration’ linked to the FSMA 2000 actions around the longstop have led to the unfairness problems we have today. It is immoral and most would take the view it is an illegality that requires legal challenge if reasoned argument fails to persuade.

It is encouraging to see the stoicism of advisers in the face of much adversity; really the question to ask (that for obvious reasons we could not) was: ‘Are you planning to enter the industry within the next two years?’

At the moment the costs and liabilities incurred by poorly thought out, ever changing and often retrospective regulation makes taking on new entrants an unattractive option for many firms. And an impossibility to start a new firm from scratch, ie no clients like many of todays long standing firms did.

To summarise, and as noted in our submission of the survey to MP’s and the regulator, “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. 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”.

To see the full survey results with all the comments, simply download this pdf.

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.

MAS now grooming complaints?

Advisers, and others who fund the Money Advice Service will not be best pleased.

With MAS also not hitting the spot with the TSC, I came across by complete accident last week an attempt by the MAS to groom complaints, not quite what one should expect from such an organization is it?

They have a section on ‘Endowment Complaints and it stated the following:

If you feel you were mis-sold your policy you need to put your complaint in soon, because there is a deadline looming.

You have either:

  • six years from when the policy was sold, or
  • three years from when you realised the policy was potentially mis-sold

For many people this latter date is the most important and it coincides with when they received a letter from their endowment provider warning them of an expected shortfall in their policy.

However, if you didn’t fully understand this letter at the time and have only just realised you may have been mis-sold your product, there is still time to put in a complaint. Just make it clear that you are within three years of when you fully understood the situation regarding your endowment and realised it was mis-sold.

This statement was followed with a link to the ‘Which’ website to download a standard complaint letter.

This is very worrying and you would think that the MAS would consult theDISP rules before making such a statement.

The DISP rules are very clear:

The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service:

(1) more than six months after the date on which the respondent sent the complainant its final response or redress determination; or

(2)  more than:

(a)  six years after the event complained of; or (if later)

(b)  three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint;


(3) in the view of the Ombudsman, the failure to comply with the time limits in DISP 2.8.2 R or DISP 2.8.7 R4,5 was as a result of exceptional circumstances;


1An example of exceptional circumstances might be where the complainant has been or is incapacitated

Oscar Wilde once said that “Most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one’s mistakes”.

It’s not working here MAS is it?

And it is certainly not fair and reasonable to suggest that by simply saying you did not “fully understand” is sailing very close to the wind in the eyes of many advisers and we are pleased that our research has now resulted in this ‘error’ being corrected.

Grooming a ‘consumer’ to be, shall we say, economical with the truth to obtain pecuniary advantage is simply inappropriate.