The number of mortgage endowment complaints against IFAs increased again in 2005/06, according to the Financial Ombudsman Service (Fos).
The Fos’s Annual Review reveals 12,489 mortgage endowment cases relating to advice from IFAs were made in the financial year 2005/06, compared with 9,376 the previous year.
Emma Parker, press officer at the Fos, states: “It is not a surprise that mortgage endowment complaints have increased against IFAs. IFA complaints generally come in later than provider complaints, as we saw with precipice bonds and the pensions review.”
By contrast, the volume of endowment complaints against the largest firms has fallen slightly for the first time in recent years and the report suggests the various time-bar rules are already starting to have an impact on the number of new mortgage endowment complaints it is able to look at.
Sir Christopher Kelly, chairman of the Fos, states: “This may indicate that the deluge of mortgage endowment complaints could finally be on the point of receding. However, the steady flow of incoming new cases – predicted to continue into next year – means we are still operating at high-water level.”
As a result of regulatory focus in the mortgage endowment area – with the Financial Services Authority (FSA) stressing the importance of firms handling mortgage endowment complaints fairly and properly – the Fos says it has seen a general improvement in the quality of complaints handling by the largest firms.
It expects to see this improvement reflected in an increase in the proportion of cases where it decides the complaint has been properly investigated and declined by the firm involved.
Of the firms complained about across all products, 45% were life insurance and investment product providers, 26% were banks, 14% were IFAs, 7% were general insurers and 3% were mortgage and general insurance intermediaries.
Most of the complaints made against IFAs in 2005 were about mortgage endowments (79%), followed by other investments (10%), personal pensions (6%), and securities (2%).
The report also reveals the Fos handled 672,973 initial enquiries and complaints from consumers in 2005/06 – a 10% increase on last year – of which one in six turned into cases requiring the involvement of adjudicators and ombudsmen.
The number of new cases increased by 1.8% to 112,923 and the Fos suggests this results from the continued heavy volume of mortgage endowment disputes being referred to it.
Of the 112,923 new cases, 69,149 were about mortgage endowments (61% of all complaints), 15,795 were other investment-related cases (14%), 13,709 were banking-related cases (12%) and 14,270 were insurance-related cases (13%).
The Fos saw a 24% increase in insurance-related cases and an 18% decrease in cases involving investments other than endowments.
Its total expenditure for the year of £52.6m was £0.5m below budget, which it says was almost wholly because of lower than expected staff costs.
Income generated from case fees was £39.8m – marginally below the budget of £40m – because more firms than expected had only one or two complaints during the year for which the ombudsman does not charge case fees.
The amount of bad debts during the year increased to £0.6m as a result of firms going out of business and leaving case fees unpaid.
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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