James ConeyAug 1 2018

Decent, fair behaviour goes a long way

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Decent, fair behaviour goes a long way
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Every time I’ve heard a consumer complain about the Financial Ombudsman Service it has always been followed by one allegation.

They would grumble: “It’s in the pay of the banks” (or insurers, investment houses).

I’m certain there are plenty of financial advisers, particularly those who have had a slew of complaints against them, who will guffaw at this notion.

The funding model – where firms pay for complaints against them after a certain point – has always seemed eminently weighed in favour of the consumer. 

But to many with a grievance against the Fos, the fact that it is financial firms funding the budget means the two must be in cahoots. 

I have always found the Fos to be fair. Its decision-making has been eminently reasonable – no matter which side of the argument it comes down on.

At the heart of this was a spirit that said service adjudicators should always look at the expectation of the consumer, what they could have known, and the transparent way the financial firm dealt with them.

The Fos is chronically overstretched. The payment protection insurance (PPI) scandal and the dawn of a new breed of claims handler placed an incredible burden on it.

Consumers out to make a vexatious complaint often ended getting caught out by their lack of honesty.

But as the Fos has grown, the reliance on common sense – the so-called reasonableness test – has been replaced by a more box-ticking culture, and worse still, shock horror, computer algorithms.

The sense of integrity seems to have disappeared. Increasingly, consumer complaints that crossed my path started to look unfairly handled. 

The review into the service by Which? director Richard Lloyd recently revealed that there was no systemic bias, but there were failings.

The fact that national TV programmes have started asking whether this was the case should be bad enough.

Instead of objecting to this, it would do the ombudsman a great service if it embraced its own inadequacies.

The Fos is chronically overstretched. The payment protection insurance (PPI) scandal and the dawn of a new breed of claims handler placed an incredible burden on it.

The banks are to blame for this. If they had simply handled PPI honestly in the first place there would be no need for an ombudsman at all.

And there is certainly no culture of wrongdoing.

But in trying to find systems and common approaches to get through the backlog, core principles seem to have gone by the wayside.

The ombudsman needs to return to the spirit of the original service. 

It does not have to be an advocate for the consumer – that would mean it loses independence – but it does have to understand human behaviour.

Computers cannot do this. Standardised questionnaires with boxes to check cannot do this.

Only human decency and a fair mind can turn the ombudsman back into the great service it once was.

Performance issues

Is Andrew Bailey worth almost £600,000?

His base salary is less than all but one of the chief executives of FTSE 100 firms. And his bonuses come nowhere near those paydays.

No, I do not think that he earns too much if you look at comparable roles. After all, the safeguarding of the financial services industry is not something that should be taken lightly.

But that does not mean his salary does not rankle. For example, why has he earned a performance-related bonus?

It comes in a year when the Financial Conduct Authority has botched the handling of the RBS GRG scandal – a situation that could have been easily averted with strong leadership.

That the bonus is deferred and some has been donated is admirable, but it deflects from the issue that I cannot see how it should have been awarded in the first place.

If he had been the boss of a FTSE company there would have been some very serious questions from shareholders.

And word on Threadneedle Street is that this may have already dented his chances of becoming the next Bank of England governor.

Go big on insurance

I was burgled last week. Aside from the heartbreak of losing some of my favourite bottles of booze, all was fine (we had a very discerning thief).

It is the admin that is the headache, such as repairing the doors that were smashed in and claiming for the lost items.

It is in these situations I am pleased with my decision to always use big name insurers.

If things go wrong, you want firms that do not quibble over minor details and have the ability to send someone out to you fast. 

That is why the small firms that always pop up on comparison website as the cheapest option can end up being a false economy.

James Coney is finance editor of the Daily Mail