Advisers have complained new regulations on complaints handling will make it even more difficult to get professional indemnity insurance in the future.
At the start of last month, the Financial Conduct Authority laid out new rules due to be imposed next June, which will require financial services firms to send all their complaints data to the regulator so consumers can use it to shop around.
Businesses will have three days to resolve complaints less formally, rather than the existing ‘next business day’ rule, but will be required to send customers a simpler, template message, informing the complainant of their right to go to the Financial Ombudsman Service
The FCA acknowledged that for some firms there will be a “significant cost” attached, but added this would not be incremental.
Regulatory compliance specialist AHK warned firms that the new rules will mean more complaints being referred to Fos, a doubling of actionable complaints which will strain the resources of smaller firms, plus a potential impact on reputation and commercial success of complaint histories being published.
Alexei Abbott, director at the law firm subsidiary, told FTAdviser the rules appear to have gone largely unnoticed by advisers, which is worrying, as some changes will have a “significant” impact.
“First there is the administrative and reporting burden, the FCA expects you to get it right the first time and it will cost more if it does go to the Fos. Then there is the issue of how consumers will use the data, will they rate advisers accordingly?”
He added that what is not yet known is exactly how the regulator will publish complaints data, or where, noting it would probably take a few years for the FCA to build it up first.
Lucy Frew, head of financial regulatory at law firm Kemp Little, agreed the changes will increase workload, but added that firms generally do have adequate complaints handling processes in place.
“The FCA’s intention to publicise complaint data to help inform consumers about the overall conduct and reputation of a firm’ may have unintended consequences,” she continued, pointing out that firms with the lowest numbers of complaints are sometimes those which make it very difficult for customers to complain.
“Number of complaints is therefore not neatly correlated to firm conduct, customer satisfaction or customer service; it would be unfortunate if firms are discouraged by the new rules from seeking customer feedback.”
Greg Heath, managing director at Derbyshire Booth Financial Management, stated that PI insurers will not like the look of the new rules. “This will be another bureaucratic and costly item for nothing more than ticking a box.
“The FCA are not TripAdvisor and the information will be useless to the average consumer other than showing complaints.
“Maybe I could ask the FCA to add all my glowing client testimonials shown on our website also to their database, as that is more useful and reflect what they might receive as a service.”
Carl Lamb, managing director at Almary Green, said that this is another example of the ideal world and the real world working against one another.
“I think that they really don’t fully understand the complexities of dealing with human beings when it comes to financial planning and how people have short term memories when it suits them.”
Malcolm Coury, founder and managing director at Money Wise IFA, agreed that this is another “example of regulatory overkill” and exactly why PI insurers are so scared of providing cover to advisers.
“It’s as if the regulatory system itself actually results in an increase in complaints; quite perverse.”
Affluent Financial Planning managing director Carl Melvin questioned what would be done about “vexatious claims” made by claims management companies and “chancer claimants”, calling on the FCA to address this issue.
“There is no drawback in making such claims – no financial penalty or other punishment is imposed by FCA/Fos – so why not have a go? Addressing this would do much to reduce Fos caseloads so they can focus on genuine claims.”
peter.walker@ft.com
