Concerns expressed by Walter Merricks, chief ombudsman at the Financial Ombudsmand Service (FOS), last week that the existence of the FOS could encourage an "unhealthy propensity" among consumers to demand redress for every perceived loss has sparked comment from IFAs.
Charles Seymour-Cole, IFA, says:
The consumer is in a no lose situation with regard to complaining. It does not matter how slick and fair an IFA's complaint handling process is; if the consumer is in a loss position, whether real or perceived (as in the case of endowments), and they see a chance of redressing that loss position without it costing them anything to do so, why would they not want to complain just to see if they can get anything out of it?
Peter R French,IFA at Troy French, says:
The entire issue of caveat emptor seems to have been ignored. Our new culture is that whatever happens that is negative, some one has to be to blame.
Every adviser has to have perfect foresight, a perfect crystal ball, and above all be able to foresee changes in legislation, natural disasters and market changes.
To protect the adviser from the implications of the unexpected, the degree of risk assessment to be recorded relating to the proposed investment for that client has to be so obsessively carried out that the effect will be for advisers to become over cautious, over risk averse and probably avoid investment opportunities which are good. If the normal processes of law are to be bypassed by having an all powerful ombudsman dishing out cheap justice where access by the aggrieved public is free of charge regardless of the worth of the claim or chance of success, it follows that everyone will try to get compensation regardless of worth of claim.
If the proportion of claims rejected is large, then the ombudsman is in danger of rejecting too large a proportion of claims. This will cause adverse publicity from the consumer press. The only way of dealing with the matter is for the claim to have to be accompanied with a small charge which could be lost if the claim was clearly vexatious. I believe the only way ahead is by using class actions where the courts decide, nor an arbitrary decision made on an ad hock basis against which there is no appeal and where no case law applies.
By passing usual legal processes is against the laws of natural justice and we are seeing more and more erosion of individual freedom because access to the Courts is denied.
Guidelines need to be laid down over what is miss-selling and far tighter control of product literature. It is essential that the amount of material involved in the sale must be reduced as the more that is produced the less the public will look at it. Much of the problem lies with the FSA.
Finally the laws of unexpected and unforseeable events, has to be redefined to avoid advisers from being victimised by a redefinition of risk profile. The alternative will be to see less advice, which I guess is what the Treasury would like anyway. If the risk to advisers is too great, then the PI cover will become unaffordable.
Adrian Seager, IFA at Alexander Price, says:
It seems to me that mediation is lacking from the ever growing complaint cycle. Mediation is now an expected tool to be used before the litigation gets to a court.
The courts will take a dim view of potential claimants if they refused to agree to mediation, as an attempt at avoiding the need for a court hearing.
Perhaps the FSA should adopt a similar stance, and encourage mediation "specialists" rather than lawyers, and form a necessary barrier to what is currently, the compensation culture we now have to live with.
Nick Jones, mortgage broker at NJL mortgages, says:
I believe very few complaints are genuine. All advisers now have to be fully qualified and competent by sitting exams set by the regulator. When an adviser recommends to his/her client a specific product, a Key Facts Illustration and Key Features Document have to be given, and followed up with a reasons why letter confirming all the discussions that took place.
How can that be challenged five, 10 or 20 years down the line?
We can only do what is right at the time. How can someone come along years later and say although that was right at the time it is now not right and you have to pay compensation?
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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