The complaint time bomb

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How long is too long for a client to make a financial complaint about the advice they have received? It is a question that is coming increasingly to the fore and one I suspect many advisers are asking themselves.

Soon we will hear from the Financial Conduct Authority about the time bar on payment protection insurance (PPI) complaints after a decade of irritation. I am sure we will all miss being texted, rung up and generally pestered to death by PPI claims firms. Or perhaps not.



The regulator will rule that PPI complaints must eventually be time-barred. Inevitably this will be challenged so it may be some years before we have heard the end of the PPI saga, even though the curtain is beginning to come down.

Fortunately, few advisers will have been chased over PPI, albeit virtually no-one in the UK has been untouched by the endless encouragement by claims firms to make a complaint about PPI. 

As a sidenote, it is probably worth pointing out that the PPI firms will need to move on to something else to complain about and that may well be something advisers need to be concerned about. I have already seen advertisements encouraging consumers to make complaints about poor investment advice from their adviser but that is a topic for another column.

There is no doubt the PPI avalanche is now past its peak. At one point in 2009, the Financial Ombudsman said it accounted for 30 per cent of all cases. 

What is more important is that the PPI complaints mountain has created a whole industry of professional complaint firms. These will not go away. The future is one in which advisers will need to be much sharper and better organised to protect themselves from potentially spurious claims. Paperwork will need to be better kept, advice more clearly justified, due diligence performed better and so on. I doubt many advisers have not learnt lessons from the PPP and other complaints sagas.

I was reminded of all this by a story in Financial Adviser recently in which the respected IFA Philip Milton criticised the Financial Ombudsman Service (Fos) for being inconsistent about its time limits. Acting on behalf of two clients, he was “bemused” to find the Fos had rejected a complaint about mortgage advice because of its time bars. The Fos will generally only consider a complaint within six years of the event or, if later, within three years of when the consumer first realised they had been mis-sold or had grounds for a complaint. That is a bit vague, but time bars make sense.

Of course, the Fos has considered many complaints in the past that go back decades, particularly endowment and pensions claims. It is a unique feature of financial advice – and the very long-term contracts often entered into by consumers with their adviser – that it can take 25 years or more for a product to mature. That is 25 years for something to go wrong.

I recall once being contacted from Spain by an IFA who had retired many years previously but had been contacted out of the blue about a complaint relating to endowment advice he had given to clients 20 years previously. He was deeply troubled by this. He felt that at the time the advice he had given was good.

It is a great shame the financial advice sector has never properly resolved how to deal with very old complaints about advice and it is probably time that it did. 

In any event, Mr Milton has a point. Trying to explain to clients that some complaints can go back 20 years but others must be lodged within six does not make sense to most consumers.

The Fos, in its defence, is pretty clear about when complaints will be time barred but these deadlines should be made clearer to consumers on all product details and in literature. Consumers understand the two-week cooling off period when they buy a financial product. It is surely not beyond the wit of the industry to state clearly when complaints can be made, what they can be about and to make sure that consumers understand this when they buy a product or receive advice.

I started by asking how long is too long to make a complaint? The answer is that there is a limit to what is too long. Consumers cannot expect to buy a financial product and then claim 20 years later that they did not understand what they were buying. I exclude from this consumers, perhaps vulnerable, naive or elderly who were pressed or cajoled into buying a financial product they did not want owing to pushy salesmanship. That is not acceptable. 

In the case of PPI, for example, providers often hid PPI insurance inside other products or did not make clear the cost of the PPI insurance. But that is not the same as a consumer sitting down with an adviser, receiving many hours of advice, written recommendations and endless risk warnings and projections arguing they did not have a clue what they were buying. 

Kevin O’Donnell is a financial writer and journalist