Today (15 July) the Financial Ombudsman Service published 1,253 final rulings that have been handed down since April 2013 as its decision webpage finally went live. Here, FTAdviser analyses the first wave of rulings to see what we can glean about the ombudsman’s operations.
If you’re subject to a Keydata complaint, you’re screwed
It may come as a small surprise, but of three complaints published against advisers relating to Keydata, all three of them were upheld, perhaps confirming the consensus view that advisers subject to a Keydata complaint are doomed to fail.
This includes one complaint against a recommendation by AWD Chase de Vere, a company which recently reported a drop in profits reflecting mounting legal costs in the company’s battle over who will pay recompense for Keydata.
Not only that, but in each case the Ombudsman derided the adviser specifically, saying they had lapsed in their duties. Mis-selling investments based on a faulty assessment of client risk was a major theme in the Keydata cases.
In one decision the Ombudsman said: “If the IFA had carefully considered the product literature (as it should have done) it would have realised that the bond was not suitable for cautious to moderate investors...”
In another, “I do not… believe it is unreasonable to hold the IFA responsible for any losses incurred as a result of being in that investment – whether or not it subsequently turns out to have been the subject of misappropriation.
“The IFA had a responsibility to ensure any advice provided was suitable and, by failing to do so, I consider he acted with complete disregard for [client] interests.”
In a third decision, the Ombudsman said: “Rather than simply relying on the headline description of the investment, I said the IFA should be exercising professional judgement about its inherent nature to assess its suitability for their needs.”
Perhaps more surprisingly, a search for Arch Cru on the Fos’ decisions website yielded not a single result.
A game of risk
As with the three Keydata cases, a straw poll of pensions and investments complaints which included the term “advice” (yielding 57 results) revealed misconstrued risk assessment is often cited as a repeated reason for finding against intermediaries by the Ombudsman.
FTAdviser has previously questioned the objectivity of the Ombudsman in reaching its decisions, finding against advisers even where the product marketing information may actually have been factually incorrect.
It has often been a bone of contention that the Fos can retrospectively decide whether a client had a suitable risk profile for a client, especially when it has even ruled against advisers that conducted full fact finds and recommended higher risk investments for ‘adventurous’ clients.
In one particular case, the Ombudsman found against Openwork for failing to conduct a proper risk assessment even after an adjudicator had previously sided with the advice firm.
FSA didn’t even know investment wasn’t authorised
The now defunct Financial Services Authority did not have a clue as to whether Luxemburg-based Arm Asset Backed Securities needed authorisation, according to another decison.