Levelling the regulatory playing field
In a recent article (July 3) the following was said: “Jimmy Barber, chief operating officer at the [Financial Services Compensation Scheme], said about 70 per cent of the claims that reach the lifeboat scheme are submitted by [claims management companies].”
What I find particularly worrying is that Mr Barber said: “When somebody does choose to use a [CMC] we then have to bear in mind the customer at the end of that claim, and so we collaborate effectively with the [CMCs] to make sure that the customer gets the best experience possible.”
The Financial Conduct Authority now regulates CMCs, and not before time. CMCs should be party to the same funding requirements as authorised companies, that is, a case fee charged once the threshold is reached.
A few suggestions that may level the playing field in the interest of fairness:
1. Fee income of the Financial Ombudsman Service would be secured and those who use (and, I believe, abuse) the system would pay for the privilege.
2. Claimants would still have the same benefits as today. A no-cost complaints procedure, if they sign a declaration that their complaint is not being orchestrated by a third party. Any proven breach would leave them open to civil and perhaps criminal censure.
3. Those that allow CMCs to invent and compose complaints would be open to the same sanction. CMCs are very inventive.
The vast majority of our industry is made up of conscientious advisers in small companies who have their clients’ best interests at heart; in my view CMCs exist with the sole purpose of generating income for themselves by putting forward complaints in a manner to which the Fos is receptive.
4. All correspondence should be open to all the parties involved; I have evidence that a CMC has corresponded with the Fos without the knowledge of the company against which they have made a complaint.
5. A sole trader, or other small company, may experience many a sleepless night and be caused ill-health. If this is caused or suspected by an ombudsman of a CMC, an award should be possible against the CMC where a CMC is involved.
6. CMCs should be allowed to appeal an ombudsman decision, as should advisers in the courts.
Financial Planning Wales
I see that there is some very welcome news for advisers: the possibility of a rebate and reasonable levy from the FSCS (July 5).
However, in the interest of fairness, perhaps we should also look at the plight of larger companies and discretionary fund managers. As you report, some may be paying up to £3m and I know of one stockbroker who has just been landed with a bill for £1m. By any measure, this is not chicken feed.