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.