Where now for the next Fos chief?

At chief executive and chief ombudsman Caroline Wayman's last meeting with the Treasury Select Committee in November, Mel Stride, MP and committee chair, described the Fos as an organisation with a number of problem areas it needed to focus on "fairly robustly" in order to move forward.

Just four months later, Wayman – who had been at the helm of the organisation for seven years – announced she was stepping down amid revelations by the Daily Mail's Money section that the Fos was facing a backlog of 158,000 complaints.

The new leader faces the challenge of continuing uncertainty about demand for the organisation - Adam Samuel, compliance consultant

So, where now for the new chief of the ombudsman that has come under increased scrutiny in recent years over its handling of complaints, an organisational restructure reported to have gone wrong, and fees, among other issues?

Continuing uncertainty

Adam Samuel, a compliance consultant, author and former PIA ombudsman, says: “The new leader faces the challenge of continuing uncertainty about demand for the organisation, which makes planning almost impossible."

In 2015 the Fos undertook a major reorganisation, which saw more casework moved to be carried out by generalist investigators rather than specialist adjudicators.

During the TSC hearing, committee member Rushanara Ali, MP for Bethnal Green and Bow, repeated allegations made by an ex-Fos staff turned whistleblower, that the reorganisation had left the service in "disarray", with the public waiting as long as two years to get justice – “assertions” that Wayman said she did not recognise.

Samuel says: “The Fos seems to be still suffering from a botched reorganisation some years ago which demoralised staff and produced no obvious benefits. 

“Its staff training has never been very good. In that respect, it handles far too much internally. It should be encouraging staff to obtain external professional qualifications at the very least to validate their knowledge.”

In a series of letter exchanges between Wayman and Stride, following the committee hearing, waiting time was just one in a long list of concerns raised.

Case costs was also included. The committee wanted to know, where the cost of a case is currently £960, what action was being taken to improve case-handling times and reduce costs closer toward the £650 case fee.

Also, given the expectation that growing complexity will increase cost per case, what action (with time frames) was being taken to improve case-handling times and reduce costs, while ensuring that the cases are handled well? 

And how do case-handlers ‘specialise’ where greater in-depth knowledge is required, and how are cases appropriately allocated to these specialist case-handlers?

In one of her written responses, in late January, Wayman said the Fos had set out to resolve significantly more cases than it expected to receive, which was part of its overall plan to bring down waiting times. 

However, she admitted that as a demand-led service, the Fos continued to face significant uncertainty in the volume and type of complaints being referred to the ombudsman – two factors that are having a direct and significant impact on its timeliness.

Another has been the pandemic, which placed a number of additional pressures on its service in the past year.

Wayman said: “Government measures to reduce the spread of the virus meant we had to operate differently. Not only did our people face their own challenges – such as home-working in less than ideal conditions and balancing childcare responsibilities – our customers were also impacted. 

“Some larger financial businesses had to temporarily suspend their work with us due to staff shortages and some smaller businesses needed more time while they concentrated on the difficulties facing their businesses during the pandemic. 

“And, on the other hand, some consumers needed more time to send us the information we required while they focused on more immediate concerns affecting their lives and livelihoods. This meant that we were unable to progress some cases as quickly as we would have liked.”

As at November 26 2020, the Fos had 56,348 open cases that were more than six months old and 23,625 open cases that were more than two years old – 18,600 of which were payment protection insurance cases relating to a single issue with a claims management company.

Compensation limits

According to Kevin Moss, a director at Valid Path network, the problems with the Fos stretch beyond the organisation itself. He says a "vicious cycle" has been created where the increase in the upper limit of compensation to £350,000 from £150,000 in 2019 – set by the Financial Conduct Authority – has led to a mushrooming of claims.

And with a number of professional indemnity insurers exiting the market during this period of increase, businesses unable to get affordable PII have been unable to pay the compensation themselves, laying the cost at the door of the Financial Services Compensation Scheme.

This was a point raised by the TSC to Wayman, who responded that although advisers had raised concerns with her about being priced out of the market owing to the impact of higher compensation limits on PI, she did not have visibility over the entire market to conclude that PI had indeed become widely unviable.

Valid Path's Moss is also critical of the Fos’s decision-making process. He says that as the Fos is not bound by the law – making decisions based on what it thinks is fair and responsible – this has created a culture where adjudicator decisions are more subjective than objective.

Moss says: “If you had an objective, reliable methodology, [decisions] would not hinge on who is doing [the case] or how warm and kind they are feeling on a particular day. It would eliminate all that subjectiveness. That’s a large part of the problem.”

Between 2019-20 uphold rates for the most complained about products in complaints about IFAs were: 59 per cent for self-invested personal pensions, 21 per cent for house mortgages, 42 per cent for occupational pension transfers, 42 per cent for portfolio management and 41 per cent for personal pensions.

Table 1: Uphold rate for top five most complained about products in complaints about financial advisers (2019-20)

Table 2: Uphold rate for top five most complained about products in complaints about financial advisers (2018-19)

When it came to uphold rates in 2019-20 for different complaint types about financial advisers, for sales and advice, it was 43 per cent (2018/19: 41 per cent), while administration was 27 per cent (2018/19: 35 per cent).

At the November hearing, Wayman told the committee that despite the upper limit increase they had seen less than 50 cases hitting that threshold or going above. The complaints were mainly protection and defined benefit transfer cases, as well as scams – the total 50 a “relatively minimal” number, she added, when compared with all Fos cases.

And despite not being bound by the law, she argued it was at the “very top” of the Fos's consideration of any complaint, together with regulatory rules, guidance, codes of practice and, overall, what they think is good industry practice.

A spokesperson for the Fos told FTAdviser: “The Fos was set up by parliament as a less formal alternative to the courts. Our role, set out in the Financial Services and Markets Act 2000, is to reach a fair and reasonable decision based on all the circumstances of the case.

"We do this by taking into account relevant law and regulations, regulators’ rules, guidance and standards, codes of practice and (where appropriate) what the ombudsman considers to have been good industry practice at the relevant time. Our case handlers and ombudsman have a wide range of technical, academic and professional qualifications, as well as experience. The ombudsman service is operationally independent of the FCA.”

Industry shortcomings

Former PIA ombudsman Samuel says despite the Fos’s own internal shortcomings the industry also has a responsibility to improve its complaints handling and tighten up its advice process.

He adds: “Firms do not understand the ombudsman and how it works. This affects the numbers of complaints, which remain absurdly high in the type of complaints that have been around since the birth of ombudsmanning in the 1980s.

“Advisers want an ombudsman that will agree with them. That is not an ombudsman. Advisers also want an ombudsman who will agree with their clients when they complain against other firms. The ombudsman's job is to judge complaints in an objective neutral way.

“The Fos needs more knowledgeable staff but it must not go native with any lobby, be it either industry or consumer. It certainly needs to upskill some of its staff. It has no business getting into bed with the industry. However, staff should be taking industry qualifications. Mind you, it would help everyone if the professional bodies offered proper complaint-handling qualifications.”

Jonathan Cavill, senior associate at Pinsent Masons, agrees there is generally always going to be a tension between businesses and the Fos.

Mr Cavill adds: “The fact that the Fos has received the complaint means that more often than not the firm does not believe it should be upheld. The risks are material for firms; it’s not always about that one complaint, but the bigger picture. 

“As the Fos doesn’t strictly need to follow law or regulation, if the Fos finds against a firm it could have an impact on the firm’s business model if there needs to be systemic change to reflect the decision.

"The new leader will be under constant pressure and exposure – especially post-pandemic. They have to account to parliament and make public appearances: so someone who is media savvy and a strong communicator, but also has a good understanding of day-to-day cases before the Fos and those macro issues coming down the line. In essence, they may need to be more of a chief executive than chief ombudsman. It is also a fantastic opportunity for the Fos to think about diversity and inclusion with respect to the new role." 

Samuel adds: "The perfect chief ombudsman does not and cannot exist. It is a job requiring far too many elements to be found in one person or even a group of them. There is a need for clearer policy making in this respect.

"It is vital that the new chief ombudsman is a colourful, courageous and public-facing individual who can at the same time lead the organisation. A group of senior people supporting that person must be similarly capable of giving a dynamic face to an organisation that has been rather worn down by PPI."

With the replacement for Wayman yet to have been confirmed, whoever takes over certainly has their work cut out for them.

Ima Jackson-Obot is deputy features editor of FTAdviser