Which newspaper do 20% of FOS complainants read?
The Financial Ombudsman Service (FOS) has released its 2013/14 annual review (click here) – a document spanning 177 pages and nearly as many colours on the front page as it no doubt seeks to demonstrate a vibrant and relevant image.
In amongst the hundreds of stats is some interesting data relating to investment/pensions complaints made to the FOS. So here goes:
- The FOS received 15,938 complaints relating to investments and pensions. This was down 20% on the previous year and is down on the last five year average. Complaints must have tailed off significantly in the second half of 2014 because at the half-year stage the FOS’ data showed that these complaints were up by 15%
- 64% of investments and pensions complaints (just over 10,000) related to sales and advice
- Complaints about investment linked products (all 3,104 of them) were down 34% on last year. Of the products most complained about, only complaints about film partnerships increased (by 134% from 84 to 201). If you take out complaints about film partnerships (for which we believe there may be jurisdictional arguments as to why FOS should not be considering those or any other tax mitigation scheme complaint) then the total complaints fell 37% year-on-year
- Complaints about pensions remained about the same as last year. Of note, there was a spike in complaints about SSASs and SIPPS (an increase of 49%) and free standing additional voluntary contribution schemes (increase of 81%)
- Complaints about portfolio management were down 20%
- Mortgage endowment complaints were down 13% and there have been significantly fewer complaints about whole of life policies (FOS puts this down in part to less fanciful cases referred by claims management companies)
- Complaints about UCIS are on the rise – both complaints about direct advice to consumers and through SIPPs. FOS acknowledges that UCIS complaints often raise difficult jurisdictional questions. In particular, FOS identifies that in some cases it was seen, appointed representatives appear to have acted outside of their authority from the business, meaning consumers have been left without recourse to FOS (this is an issue we have advised on before and with which Partner, Rob Morris, has had much recent success, for those who wish to discuss further)
- The FOS says that UCIS and pension disputes are the most likely to be tenaciously fought by businesses who often involve lawyers. It is no surprise that these often tend to be the higher value disputes
- Of the SIPP pension disputes, the FOS states: “we find in the consumer’s favour in a relatively high proportion of these cases.”
- 26% of all complaints were resolved with the FOS directing a firm to pay compensation based on a formula (which can lead to a compensation calculation in excess of £150,000)
- One trend of note is an increase in the number of non-PPI complaints that end up with an Ombudsman (ie do not get resolved at adjudicator level). The current percentage figure is 18% – up from 6% in 2006/7. This, in part, might be behind the FOS’ decision to employ 50% (78) more Ombudsman (joining 1,000 new adjudicators in 2013/14 and the 1,000 adjudicators recruited in 2012/13). Interestingly, only 24% of decisions referred to the Ombudsman came from a business. Investments and pensions accounts for 30% of Ombudsman decisions. Separately, mortgages account for 28% of referrals to the Ombudsman (it is important to bear in mind that mortgage complaints include complaints to banks and is not just advice based complaints)
In terms of outcomes, the FOS upheld:
- 28% of mortgage endowment complaints (down 3% on 2011 figures but up 3% on 2013 stats)
- 21% of whole of life policy complaints (down 11% on 2011 figures)
- 37% of investment bond complaints (down 23% on 2011 figures and roughly static on last year’s figures)
- 34% of pension complaints (down 3% on 2011 stats and static on last year’s figures)
- 51% of stockbroking and portfolio management complaints (down 15% on 2011 figures but up very slightly on last year’s figures)
So what does this all mean? The statistics read well for financial advisers: complaint numbers are largely down across the board and the percentage of complaints being upheld is also down. This is likely in part to do with more buoyant markets over the last few years. The stats shield the fact that there has been a huge amount of past business review activity by some firms under the watchful eye of the Financial Conduct Authority (FCA) and of course it does not tell us anything about complaints firms resolve without matters needing to go to the FOS. The stats are, however, consistent with our impression of what’s happening in the financial adviser market place.
The FOS also reports that in 88% of cases firms have sent their final response letter within eight weeks. It would be interesting to know the figure excluding PPI complaints but it does suggest firms are getting better at, or are taking more seriously, their complaint obligations. This is a behavioural change which is positive for the industry.
In terms of trends, we expect to see more pension related complaints over the next year (particularly relating to SIPPs following the FCA alert on 28 April 2014 confirming that no transfer to a SIPP should be considered without also considering the suitability of the underlying investments and some life styling funds which are coming under increasing criticism from the Regulator and commentators). Plus there is always the inevitable confusion and opportunities for mistakes following the unexpected changes announced in the budget. We also expect more UCIS complaints and more film finance disputes (as claims management companies such as Rebus seek to drum up more complainants). Finally the number of mortgage complaints is likely to creep up at some point once interest rates start to rise and/or those currently on interest only mortgages face being unable to repay the capital. However this may not be reflected in FOS figures as these complaints are increasingly likely to be resolved before they go to the FOS because the approach of the FOS to such claims – rejecting out of hand defences that would considered by a Court – has become clear.
Whilst firms’ complaints handling practices might be improving, we know that the FCA remains concerned that too many complaints go to the Ombudsman. In September 2013 the FCA announced that it was going to conduct a review of complaints handling with the objective of reducing the number of consumers requiring the services of the FOS. The review will be done in two phases, with the first identifying how firms record and report complaints and the second considering firms’ approach to redress and root cause analysis. Therefore systemic issues and MI will be at the forefront of the regulator’s mind this year and will be a very topical issue over the coming months – just as we may see more input from the FCA into complaints handling processes and redress options.
Firms should also be wary of the increasing amount of data being collected and analysed by the FOS in light of its renewed commitment to work closely with the FCA. In the two forewords to the annual report, the FOS Chairman warns that the FOS is: “constantly on the lookout for trends which may indicate a cause for concern, and for possible action by the regulator” and comments on “the growing strength of our relationship with the FCA – now just over a year old – and the effectiveness of [the] cooperation with them” while the Chief Ombudsman who warns that the FOS has: “kept the FCA abreast of emerging issues that [the FOS has] come across, as well as where [the FOS] ha[s] seen individual examples of poor practice.”
Oh, and the reason for the title, in amongst all the statistics, the FOS reveals that the most frequently read paid for newspaper by the consumers who complained to them was the Daily Mail/Mail on Sunday, scoring 20%. We’ll leave it to you to decide whether it would be prudent to include a question about this in any “Know your client” documentation…