The Financial Ombudsman Service caused a lot of anger among IFAonline readers last week with a double whammy in its monthly newsletter, attacking so-called ‘dramatic' claims and saying a small firms division is unnecessary.
Chief ombudsman Walter Merricks said threats of judicial review would not rock the Fos’s foundations and he attacked claims as being dramatic and contradictory.
So does this mean he is merely paying lip service to complaints about the scheme?
If so, the industry is entitled to feel very worried because by ignoring threats of judicial review the Fos will never be able to move along with changing times or, indeed, improve the way it operates.
History has shown us that one of the best ways to reform legislation is by getting a case through the courts, which may deem the current law to be unfair, old-fashioned or unnecessary.
Alan Lakey, partner at Highclere Financial Services, says Merricks’ comments are even more worrying if we bear in mind the fact he and other senior ombudsmen have said they welcome judicial review because it can clarify areas of greyness.
One ‘grey’ area is the circumstances in which the Fos will over-turn time-bar decisions, following the challenge by CPH Financial Advisory Services about a couple whose endowment case against Friends Provident was time-barred.
This case did not go to judicial review and the firm has resorted to sending more and more time-barred cases to the Fos in the hopes that one day it won’t overturn the case so it can start judicial review proceedings.
In circumstances like this, you would think the Fos – which always maintains it wants to be seen as transparent, accountable and independent – would encourage judicial review as a way to clarify a grey area.
Saying it won’t be bullied by legal threats is hardly helping the situation, particularly as the Fos has said on several occasions it does not have a right to appeal and the only option for firms is to go to court.
In the same newsletter, the ombudsman outlined its reasons why a small firms division would not add value, claiming it already has specialist teams to deal with small firms.
The Fos often points out most small firms don’t ever have a case with it or, if they do, they only have one or two which they get for free.
But I’ve heard several stories of some IFAs who have had up to 12 cases in one year and the impact this has on a small firm, compared with a large bank or insurer, surely justifies them receiving specialised help from a small firms division which may better understand their needs.
If you want to give your thoughts on whether the Fos should have a small firms division why not click on the latest IFAonline industry poll?
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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