Time for change at the ombudsman

Notably, the review recommended consulting on a funding overhaul and the introduction of a risk-based levy. Under this model, firms would pay based on the level of risk they bring to the market. As Money Management has previously reported, advisers have welcomed this and argue that providers should contribute to the Fos’s upkeep in order to take responsibility for the suitability or otherwise of their products.

“Why don’t product providers and wealth managers also pay into the Fos?” asks Susan Hill, a chartered financial planner. 

“It’s not only the advice that it looks at [but also products].”

Changes afoot

In any case, the organisation could see its workload ease in the short term, once PPI complaints – a major source of demand in recent years – have finally worked through the system.

The service saw the number of cases resolved a year rocket from 40,000 in 2002 to more than 500,000 in 2014, as Chart 1 shows. 

In 2017-18, some 258,331 of the resolved complaints were about PPI, with 186,417 new complaints on the same subject. This was not an isolated year, either. In 2014 alone the Fos received a staggering 399,939 new PPI cases, and over the past three years 50 per cent of complaints have been of this nature.

The latest figures show overall numbers have fallen back but remain elevated, with the Fos resolving more than 400,000 cases from 1 April 2017 to 31 March 2018, and receiving just shy of 340,000 new ones.

With the 29 August 2019 deadline for PPI complaints drawing closer, the workload will soon fall back, proving a respite for the service. But other developments may well create more work for the organisation, in particular relating to cases that involve advisers.

So far the number of complaints related to the pension freedoms, introduced in 2015, is low, and the same is the case regarding advice given on defined benefit pension transfers. But details from parliamentary inquiries into both state that harm has already occurred. This suggests a flood of fresh complaints in the pensions universe could be due, putting fresh strain on the Fos.

At the same time, although the workload for PPI claims is set to tail off, a new tranche of firms could be given access to the service.

In January, the FCA launched a consultation on plans to expand the scope of the Fos to consider complaints from small and medium-sized companies (SMEs). As things stand, only individual complainants and micro enterprises are allowed. The regulator said the change might mean a further 160,000 SMEs, charities and trusts could bring cases to the Fos. Final rules on the matter are now imminent.