Defined Benefit 

Advisers slam Fos for lack of sector experience

Advisers slam Fos for lack of sector experience

Advisers have criticised the Financial Ombudsman Service for its lack of staff with experience in its sector and warned of potential unintended consequences, should it fail to address the situation.

At the Great Pension Debate, held this week in London, Nick Bamford of Informed Choice told the audience about his concerns for the service.

Mr Bamford said unlike the Financial Conduct Authority, which he said knew and understood the sector, the ombudsman did not have enough staff with experience of the adviser market to make proper judgements.

Taking defined benefit pension transfers as an example, Mr Bamford said: 'They are the adjudicators here and they don’t have the skills and experience."

Earlier this week, the Fos set out how it would be investigating complaints around defined benefit transfers through a series of case studies.

The service also stated just 2 per cent of all adviser complaints since the 2015 pension freedoms had been about this matter, and just 0.5 per cent of all complaints it handled across the whole of finance came from the advice sector.

However, Mr Bamford said that the increase in the level of redress an adviser may now have to pay to settle a complaint made the issue of receiving – and resolving – one even more acute.

"They don't have the skillset, experience and qualifications," he said. "The redress is now three times the level determined by the Crown or High Court."

He added that advisers could only try and overturn a decision based on the process through which it had been investigated.

A spokesperson for the Financial Ombudsman Service defended the experience and qualifications of their ombudsmen.

The spokesman said: "The technical, academic and professional qualifications of our adjudicators and ombudsmen are as varied as the work we cover.

"We have accountants and lawyers working for us as well as former IFAs, insurance and mortgage brokers, bankers, trading standards officers and stockbrokers. Our job is not to give financial advice, underwrite insurance policies or carry out banking transactions.

"Our staff are appointed to settle disputes - and we require the relevant qualifications and experience for the jobs we need to do this."

Victor Sacks, founder of VS Associates in Cambridgeshire, who attended the conference, agreed with Mr Bamford that the ombudsman needed more staff with knowledge of the adviser market.

Mr Sacks said: "There is a perception that the Fos raised compensation levels and is doing its own thing rather than talking to either the FCA or advisers."

This has had the knock-on effect of higher professional indemnity insurance costs for those
operating in the sector.

Mr Sacks said a colleague in the market who carries out defined benefit pension transfers has seen his professional indemnity insurance premiums increase from £3,800 a year to more than £19,000.

Additionally, the initial liability on any claims has had to increase, meaning that advisers are
considering raising fees or only taking on big-ticket clients.