The number of endowment claims made against IFAs are gradually increasing but this is because the complaints process is much slower than in large insurance companies, say officials at the Financial Ombudsman Service.
David Cresswell, press officer at the FOS, says there is now evidence of a gradual shift in endowment complaints against large providers to those against IFAs but this “reflects the pattern of most complaints” and is therefore no evidence of more complaints being made against financial advisers.
Similar examples from the FOS of delays in complaints emerging relate to precipice bonds which were first brought against large providers but eventually saw complaints about IFAs seep through, he adds.
Cresswell explains the complaints process in small adviser firms is much slower so it takes longer for the number of complaints to rise.
He says one possible reason for the delay is those consumers using both an IFA and receiving correspondence from endowment providers find it harder to know who to complain about; often the consumer’s first thought is they should complain about the policy adviser.
Furthermore, the IFA’s PI insurer and solicitor must be informed before the consumer action can come to the FOS.
By contrast, suggests Cresswell, large insurance firms have a more transparent complaints process so consumers know who to complain about and where to complain.
Such companies also tend to outsource their complaints-handling to speed up the process.
One of the difficulties when attempting to resolve cases between IFAs and consumers, says Cresswell, is when complaints do arrive at the FOS, a small firm might not have all the documents relating to the consumer so the FOS has to spend more time reconstructing the details.
It is also more time-consuming to complete cases as IFAs might only ever have one or two cases brought against them and therefore are less likely to understand the adjudication process and whether there is likely to be a case to answer, whereas large providers tend to have hundreds of complaints brought against them simultaneously and this in turn allows the FOS can streamline the process.
Moreover, Cresswell says complaints against IFAs tend to be more complex because of the individual circumstances of the consumer.
In light of the increasing number of endowment complaints, Cresswell says advisers should “recognise complaints may well be on the back of reprojection letters sent by life insurance companies”.
He advises IFAs to create a close relationship with life insurers so they know when the letters are being sent out and are prepared for questions by consumers.
Although IFAs may feel removed from a complaint because it relates to a product they sold a long time ago, Cresswell says they “cannot wash their hands of it” because the complaint is by a former customer.
Cresswell also advises IFAs to try and resolve problems early by giving consumers information about how endowment policies work.
He points out “just because a consumer is unhappy about a policy’s performance, it does not mean it was mis-sold – they might just need reassurance”.
Cresswell says the likelihood is the consumer cannot pay off their mortgage and this creates an opportunity for the IFA to become more involved in their finances generally, for example by giving pensions advice.
He says IFAs should take a “holistic approach” and try to diffuse the complaint rather than allow it to go all the way through adjudication.
Finally, if the consumer is certain they want to complain, the IFA firm must acquaint itself with the complaint rules.
Cresswell says “a lot of the rules and regulations just formalise what is good practice anyway, for example acting promptly and setting out complaints in writing”.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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