Dear Ms Wayman,
On behalf of the adviser community I invite you to consider this matter in detail. Your objectives are to protect consumers, but neither advisers nor the Financial Ombudsman Service will be able to do that if the standards we each apply are so inconsistent.
The consumers you aim to protect deserve the best advice, and should be compensated when things go wrong. But if advisers are trained to consider individual equities high-risk and your adjudicators consider them low-risk, consumers will not be getting the protection they deserve.
Similarly, when adjudicators consider that a medium-risk investor should not be exposed to any high-risk funds, this flies in the face of custom, practice and decades of academic research on the benefits of portfolio diversification in minimising investment risk.
Worse, to apply this concept to adviser recommendations but to ignore the implications for other forms of investing – such as funds or discretionary management portfolios – is inappropriate, inconsistent and illogical.
Worse, it probably means that every piece of client advice could be challenged on these grounds.
To make an adjudication, as I know you have, based on advisers taking actions which would have been a breach of regulatory rules is also grossly inappropriate.
Worse, the inability of advisers to challenge an adjudication or launch a judicial review of the use of your powersWorse, the inability of advisers to challenge an adjudication or launch a judicial review of the use of your powers, as Sipp providers have done, means that Fos is not only judge, jury and executioner but also lawmaker.
The FCA has gone to great lengths to improve professional standards, with advisers and their firms incurring personal and financial costs to continue in practice post-RDR.
Yet if a client has concerns about the advice they have been given and losses they have incurred, the judgement applied to that advice bears no relationship to the knowledge, training or experience of the advisers whose advice is being questioned.
I suggest that Fos, the FCA and the professional bodies agree common standards by which advice is to be judged when a case is referred to your offices, so that each and every one of us is working to a common understanding of good quality professional advice.
Gill Cardy is network development director of ValidPath
