Your IndustryDec 21 2015

Fos says ‘ditch War and Peace-style suitability reports’

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Caroline Mitchell, lead ombudsman at the Financial Ombudsman Service, has told FTAdviser that she wants to reassure advisers and gave her views on adviser complaints that her staff are not qualified to judge advice.

Ms Mitchell said that this year the Fos has spent a lot of time out and about talking to advisers – and hopefully reassuring them – about the approach taken to insistent client cases and suitability reports in particular.

She said the uphold rate (where Fos finds in favour of the consumer who has complained) is not actually that high for advisers (less than 40 per cent last year), which reflects the fact that “they are the experts”.

“The adviser confronted by a client insisting on making an investment they think is wrong isn’t likely to have much to fear from us as long as they make their advice and the reasons for it very clear.

“People have a right to do what they want to with their money, after all. But if the proposed investment is unwise (too risky, for example) with potentially damaging consequences, those consequences have to be laid out clearly and the consumer left in no doubt about what might happen. Then they make their own decision in full knowledge of the risks.”

Ms Mitchell said that the adviser will have discussions with his or her client before advising, but the suitability report is where the Fos expects to find the advice and the reasons for it clearly stated.

She went on to say that the Fos see some great suitability reports, noting that it is difficult for a consumer to persuade us they did not know what they were getting into when the risks are clearly spelled out.

“The report doesn’t have to be the length of ‘War and Peace’ – the consumer won’t read it if it is – but it needs to explain why that particular product is right for that particular consumer at that particular time.

“Risk warnings are most effective when they are directed at that consumer in terms of the investment being considered, rather than being lost in some small print.”

Ms Mitchell admitted that the Fos is sometimes accused of being inconsistent with the regulator – but she pointed out her organisation and the FCA “have distinct and different roles”, adding that the City watchdog takes a broad view of the industry, while the Fos resolves individual disputes.

“Advisers also say that since our staff don’t share their qualifications they aren’t in a position to judge the quality of advice.

“Our staff come from a wide range of backgrounds – including the industry – and apart from internal training, many of them have passed industry exams. But the main thing is that we aren’t advisers – we resolve disputes. So it’s problem solving skills we look for in recruiting.”

She explained that businesses have every opportunity to set out their case before a decision is made, so if they think the adjudicator is not taking everything they have said into account, then they should ask for the case to be reviewed by an ombudsman.

Ms Mitchell also told FTAdviser there will be some changes at the ombudsman service over the next couple of years. “We have been modernising the way we work and will continue to do this – that means picking up the phone as often as we can to sort things out quickly.

“We know it’s more satisfactory for both parties to have a complaint resolved as soon as possible so they can both move on.

“Regulatory changes mean that in some cases we can look at a complaint before eight weeks have elapsed and if it’s relevant to you, we’ll talk to you about it.”