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Fos: Stuck in the middle

The Fos has an essential role to play in the protection of consumers but its best efforts are hampered because the service is hindered by the restraints imposed by the FSA

By Hal Austin | Published May 30, 2012 | comments

More and more, the Financial Ombudsman Service is having to behave like a referee in a bitterly contested mismatch of a fight.

On the one hand are the heavyweights, big wallets and with very little regard for the rules, on the other is the weakling of a consumer who has no chance against the big battalions.

Like all good referees, it does its best, but the truth is that one fighter is a financial giant and the consumer is but a flyweight. Necessity was the matchmaker, not a fair contest.

Ignoring for the time being that Fos, for all the flawed reasons which underpin the Financial Services and Markets Act 2000, totally ignores the legitimate complaints of financial advisers when it comes to setting its levies, while in the process for reasons best known to itself, allows banks to operate like untouchables.

One particular point emphasised by Fos is that of investment vehicles with special offers over a limited period, such as fixed-rate Isas, but which do not give any formal notification when the offer comes to an end.

The report states: “As in previous years, many of the complaints involving savings accounts that we saw during the year were about poor administration by some savings-account providers – including delays and errors in opening accounts and in transferring balances between providers.”

It continues: “Consumers also complained to us in cases where they felt savings-account providers had not given them clear enough information about the end of fixed-rate or bonus deals.”

Fos has rightly said that because of the low-interest environment, providers are designing more complex investment products and investors are finding them more difficult to understand.

The report goes on: “These products are resulting in slightly different complaints from those we have traditionally seen in this area.

“This is sometimes because neither the consumer nor the member of staff they dealt with at the provider is entirely certain about how the savings product is designed to operate.”

This raises a number of issues, including that the deliberate intension of the product design is often to introduce complexity, which crowds out even the marketing staff from having any in-depth knowledge of how the product operates.

Second, the product provider is the expert, not the consumer, so it is incumbent on the provider to provide the necessary training for staff and to simplify the details of products for consumers. This little improvement cannot be that difficult to introduce.

The numbers in the report are also impressive: the organisation handled over 1.2m complaints and enquiries, of which about 20 per cent were turned in to formal complaints.

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Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

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John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

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Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

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Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

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