Back to basics

Financial Adviser

Happy New Year. The more things change, the more they remain the same. Fos intends to continue operating on the same flimsy principles that it has always operated on.

As far as we are aware, staff at Fos do not have to undertake any special studying to become an adjudicator or ombudsman, nor, judging from their decisions, do they demonstrate the slightest knowledge about giving financial, or, especially, investment advice.

Yet they sit in judgement almost everyday on the professional advice given to clients by financial advisers, an occupational group defined by the 1986 Financial Services Act and, since, the FSMA and the FSA and its successor body the FCA.

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Financial advisers must be the only professional body that a group of non-qualified people not only have the legal power to sit in judgement on their professional performance, but can actually fine them for giving ‘improper’ advice. It is difficult to imagine doctors, lawyers, accountants or any other legally defined profession being treated in this way.

On page two of this week’s paper, we have ombudsman Ms Louise Bardell, who, in reaching her decision, actually concluded that the advice given in a particular case was “unsuitable”.

Given the circumstances, she may well be right, but what qualifies her to be so dismissive of a regulated financial adviser? It is about time that the powers given to Fos by the last Labour government be reviewed with a view of returning these extrajudicial powers where they rightly belong.

Our common law tradition is that primary law is made by parliament with secondary law made by an appropriate body, with citizens having a right to seek a judicial review of processes and decisions.

As it stands, Fos is judge and jury in its own court with limited appeals from those decisions, no matter how much right-minded people may object.

A similar flawed decision has been made by the FCA when it withdrew the investigation in to the roguish behaviour of the big banks. What message does this send?

We need more than good luck with regulators such as these.