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.


Death by regulator

Panacea Comment for Financial Advisers and Paraplanners

11 Sep 2017

Death by regulator

We hear that the FCA has announced a ‘Terminator’ inspired marketing campaign, yes, a marketing campaign, to encourage those who have not had a win on the PPI lottery yet to get truly lucky.

The regulator is treating compensation opportunity creation as if it is a DFS sales campaign.

The outcome (iove that word)? The claims management industry has just had a boost in the form of a £42m advertising campaign that has cost them absolutely nothing. This includes advertising and dedicated phone line costs.

And as for this FCA statement:  “If you had a previous complaint about mis-selling of PPI rejected, but now want to complain about a provider earning a high level of commission, you should follow the steps below”.

Since 2011 over £27bn has been paid out in PPI compensation. How much more will this generate?

But the big worry with this campaign is about where it will lead to if FOS complaints are to be rejected and then re-allowed at a later date based on what the firm was paid. Remember, advisers have no longstop, in this case confirmed with words like this from the FCA You can complain about mis-selling of PPI however long ago it was sold to you”.

Words fail me. Will the last compensation payer turn the lights out when they leave?

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Surely still not Pete Tong at the FOS?

15 Mar 2016

Surely still not Pete Tong at the FOS?

The Financial Advice Market Review (FAMR), just published, says that The Financial Ombudsman Service (FOS) “has a crucial role in ensuring redress for consumers, and building confidence in the financial services sector, providing a quicker, easier alternative to the courts”.

The FAMR’s view on the role of the FOS was “that an effective financial advice market depends on consumers having access to a fair, objective means of resolving disputes with firms” but noted that the review highlighted concerns “about some aspects of how the Financial Ombudsman Service operates”.

With this observation ringing loudly in the ears of financial advisers, the findings of our latest FOS survey may, we hope, act as a source of constructive criticism. According to our latest survey all is not well at all at the FOS.

The results will be shared with HM Treasury, the TSC, FOS and the FCA.

Once again we find that:

  • an overwhelming majority see that in 2015, FOS adjudications are unfair- 71%.
  • Adjudicators actually help create complaints where no complaint existed- 69%
  • FOS rules place an adviser or firm in a ‘guilty until you prove your innocence’ position from outset- 85%.

Download our free survey now, complete with comments.

2015 is as consistent as our previous years findings from 2011 onwards. It is the hundreds of heartfelt comments that really tell the story.

The publication of the FAMR report sees a number of recommendations published, numbers 22, 23, 25 and 26 in fact.

It will be interesting to see if they are acted upon in 2016, I am sure our 2017 investigations will assist in that discovery.

Panacea’s input to the financial advice market review (FAMR)

In November, I was asked by Harriet Baldwin MP (who many may remember came to a Panacea ‘Meet the MP’s event” shortly after her election in 2010) to contribute to the HM Treasury Financial Advice Market Review (FAMR) due to the size, influence and knowledge of the Panacea community.

The Financial Advice Market Review, as you will be well aware, was launched in August 2015 to examine how financial advice could work better for consumers. It is co-chaired by Tracey McDermott and Charles Roxburgh, Director General of Financial Services at HM Treasury.

The meeting with HMT’s Tara Fernando and some treasury seconded FCA officials lasted some ninety minutes where a number of concerns with regard to the five specific FAMR reference sources were discussed for the benefit of the consultation.

There was a great willingness to listen.

It was very clear that there was a considerable lack of understanding around many issues of IFA concern. I think this is because there is a knowledge gap, possibly caused by a failure or desire to fully understand how intermediated distribution works and why. And to understand advice responsibility anomalies such as the current lack of longstop.

It is also clear that regulators do not understand that savings and protection products are sold to the mass market, not actively purchased.

The Treasury and the FCA appear to have no knowledge of the workings or long history of commission payments, the maximum commission agreement or its reason for removal.

You may find the following bullet points with some supporting links, that were the subject of some detailed conversation, to be of interest:

1. The extent and causes of the advice gap for those people who do not have significant wealth or income 

  • Heath Report an overview, access to the report and podcast
  • Commission v Fee the RDR/ GFK report
  • Fees and the post RDR world
  • UK advice & distribution model
  • The FCA was trumpeting the fact that adviser numbers had gone up since RDR and the industry should as a result rejoice.
  • From January 2012 to July 2013 23,406 registered individuals (RI’s) have left the industry and 9,573 have joined.
  • For 2014, 5,979 RI’s have moved firm, 6,799 are no longer authorised and 4,576 have become authorised. Some 17,332 changes in one year and a 2,223 net loss of RI’s. Hardly something to shout about.

2. The regulatory or other barriers firms may face in giving advice and how to overcome them

  • Cost, known’s and unknowns, FSCS funding is wrong, unpredictable and unfair.
  • PI cover, retrospection of regulation makes pricing impossible, a claim makes even getting it a herculean task (air bag analogy)
  • New blood, the aspiration of many to start a new advisory firm has been dampened to say the least. The costs are enormous.
  • FOS perceived bias FOS survey, a link to 2014 survey and to the 2011 survey
  • FOS has no affordable right of appeal, unlike ABTA for example
  • Longstop removal and some other notes on the subject. Regulators today are in many ways a ‘doppelganger’ of the trade unions of the 1970’s, creating unrealistic, restrictive working practices at high cost allowing little or no competition. And we all know how that ended.
  • Many small firms live in fear of the FCA and will not raise their heads above a paparapit to voice concerns for fear of retribution. Very worrying but perhaps ‘Sir Hector’s message was received and understood
  • The ‘Waterbed effect’. It’s effect is the natural but not necessarily intended potential to squeeze one part of a complicated and complex regulated business model (and the attendant regulatory processes) to cause a serious bulge elsewhere in the process.

3.  How to give firms the regulatory clarity and create the right environment for them to innovate  and grow

4. The opportunities and challenges presented by new and emerging technologies to provide cost-effective, efficient and user-friendly advice services,

  • Simplified advice, but what is it- needs defining
  • A solution: to licence a product as fit for purpose, with that purpose clearly defined, as part of the process is the single most effective consumer benefit a regulator could put in place. It is the CAA equivalent of being fit to fly, it is the Food Standards Agency equivalent of safe to eat, it is the VOSA equivalent of saying your car is safe to drive.

5. How to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice

  • Consumers should understand that advice comes at a price but that price and the method of how it is actually paid should be determined by the client and adviser firm together and not a regulator.
  • Is commission still a dirty word?
  • Maximum Commission Agreement (MCA) during the 1980s and perhaps earlier there was an apparent unresolved conflict in government policy between investor protection and the belief in unrestricted competition. OFT objected!
  • Pro bono working in IFA firms was the norm in a pre RDR world
  • It is not in a post RDR world
  • The circle game? FSA told consumers advice under RDR wouldn’t cost more. Right possibly, but fewer now have access to it

The review will close on the 22nd December 2015, you have just a few more days to contribute.

Here is a link.

Coulda, woulda, shoulda? At last an Ombudsman refuses to apply rules retrospectively

A breath of fresh summer air blew through the world of ‘Ombudsmanning’ when the Pension ombudsman Tony King recently made a ruling in relation to a pension ‘liberation’ claim where a transfer was requested one month before the Pensions Regulator issued guidance to providers about such cases.

When making his decision he said, “I cannot apply current levels of knowledge and understanding of pension liberation/scams or present standards of practice to a past situation.”

This decision should set a precedent and if followed by the FOS would remove the need for any longstop campaigns to continue.

This is the very bedrock of reasoned decision making where previous regulation and FOS considerations have fallen well short.

The FOS practice of applying a kind of ‘coulda, woulda, shoulda’ to decision making, often failing to give reasoned consideration to previous ombudsman’s rules in the adjudication process, will have seen many good businesses closed, liabilities parked with the FSCS and the resulting need to increase and apply one off unexpected unbudgeted levies placing unfair burdens on the firms left.

The decision from Mr King is simply one of fairness and common sense.

But is anyone listening at the FOS, over to you Ms Wayman?

Panacea Comment for financial advisers and paraplanners It’s a funny old game

I read that despite some 40 years of being told that butter is not good for you the processes that led to this conclusion were flawed, lacking in any solid trial evidence to back it up.

In fact it is suggested that ‘fat bastard Britain’ is in fact now the fault of scientific work in 1983. The BMJ journal ‘Review’ says it is “incomprehensible that such advice was introduced for 56million Britons in 1983”.

Well I guess that the scientists, like almost everyone else in the UK, will have the benefit of longstop protection, because if they did not, can you imagine the long line of CMC’s that would be forming now making claims stick for sending people down the ‘wrong dietary road’ for 40 years, seeking compensation for being ‘miss- fatted’ and being ‘advice deprived’ of the pleasure of full fat foods.

What is it about being wise after the event that is OK for some and not others?

It seems if you were a 60’s or 70’s celeb, financial adviser or politician of that era you will be ‘hung by the neck until dead’ for what many would consider to be a mix of some poor temptation based, wise after the event actions or decisions when opportunity presented itself and some ‘he said she said’ trial by public opinion or the FOS.

Yet if you have been responsible for giving very poorly researched health advice to some 56m Brits consistently over 40 years, life continues as normal.

APFA are meeting with the FCA later this month to press the case for a longstop.

Alan Lakey, a long time supporter of the ‘Longstop’ cause notes that Britain has long prided itself on being a bastion of fairness in an otherwise unobliging and inhumane world yet Parliament has seen fit to devolve virtually unlimited power to a non-accountable limited company status quango which has chosen to override statute and remove a basic human right from a small number of UK citizens.

This removal is made less palatable by the knowledge that when the FOS was being consulted on in 1999 the FSA promised that its strictures would mirror UK law.  This promise was broken without recourse to Parliament or the industry.

Now that the post-RDR world is comprised of professional, qualified advisers – who must agree some fee structure with their clients and must hold adequate professional indemnity insurance – it is entirely appropriate, fair and morally correct for the FCA to restore this basic human Longstop right.

In a week that we hear from a community member of an FCA positioning statement, all advisers should be very afraid of a lack of Longstop.

It says:

“There is no such thing as an insistent client.  If a client wishes to take a course of action contrary to your recommendations, then a letter signed by him/her to the effect that you will not be held responsible should a bad outcome result will NOT be accepted by the FOS. 

A complaint will be found against you for having allowed the client to do what you knew to be the wrong thing and took payment for it.  Your only option is to decline to act further”.

I hope that those in the chair at Canary Wharf meeting will have ‘boned up’ on their research around what consumer detriment ‘Longstop’ reinstatement would bring in a more considered way than our oh so clever scientists looked at consumer health in 1983 as FOS views like this one above will pursue firms to the grave.

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.