Ken Davy 

Ombudsman ruling proves limit should not change

Ken Davy

Ken Davy

If evidence was needed of the importance of letting the courts decide on claims above the current Financial Ombudsman Service maximum of £150,000, I believe the Fos itself has provided it by ruling in favour of an ambulance chaser in a claim against Sanlam.

In a staggering judgement, the ombudsman has looked at a plan taken out by a client in 1988, pre-‘A-Day’, and surrendered in 1994. It was therefore bought 30 years ago and surrendered 24 years ago, yet Sanlam has now been directed to pay compensation.

Leaving aside the issue of it being pre-A-Day, and even ignoring the ridiculously long timescale between sale, surrender and now a claim, the facts appear to make a complete mockery of natural justice.

The case concerns a 26-year-old professional who took out a 25-year life insurance savings plan and cashed it in after six years because of alleged poor performance, not because he needed the money.

Fos, in its wisdom, says that he should have had a 10-year plan.  

Wisdom? Well I took out my first life assurance-linked savings plan for 21 years at age 18, which was long before entering financial services.

My only regret is it should have been longer.

After six years it had not made any money.

Nonetheless, I was still able to use it as collateral for a bank loan for my first business and, when it matured, I enjoyed an excellent profit while in between it provided life assurance for my family.

In this case, the Ombudsman states that in ‘his opinion’ the client should have had a 10-year plan.

Conversely, in ‘my opinion’, based on 30 years of dealing directly with the financial planning needs of countless clients and their families, the client was correctly advised. This, however, is the heart of the problem: Fos decisions all too often simply come down to a matter of opinion.

Opinions are no substitute for a proper legal process, which highlights the inherent dangers of the Financial Conduct Authority’s proposal to increase the Fos limit from its already substantial level of £150,000 to a massive £350,000.

This proposal is casting a long shadow over the financial services sector; it should be scrapped and the courts left to decide on claims of more than £150,000 in accordance with the law of the land.

Ken Davy is chairman of SimplyBiz Group

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