Complaints against advisers in relation to decades-old advice are not common, but when they happen they are damaging.
In July this year it was reported that a complaint against BBT Financial Services, over the recommendation of a pension transfer back in 1995, had been upheld by the Financial Ombudsman Service (Fos), which deemed the advice to be unsuitable.
In the same month it was revealed that Lloyds Bank had been ordered to pay compensation over advice it gave in 1999.
Back then, a Lloyds Bank adviser had recommended a man in his late 50s, who had recently retired, to opt for a unit trust, a guaranteed stock market bond and to invest in a personal equity plan (Pep).
So how concerned should advisers be over advice they gave years ago coming back to haunt them?
Michael Cotter, a lawyer at Setfords Solicitors, said: “I have seen over the years IFAs who retired and found themselves subject to complaints and having todeal with the Fos, many years after they thought they would need to have run off cover.”
In the absence of a long stop – something many in the industry have called for to give advisers peace of mind – there is no way to prevent an individual bringing a fresh complaint about decades-old advice.
And the latest data from the Fos has cast doubt on the case for a long stop on liability for advice ahead of a review by the Financial Conduct Authority (FCA) next year.
The risk of liability
The figures showed the number of complaints lodged 15 years or more after the advice was provided are decreasing.
If a consumer thinks they have been misled on a piece of advice they have a certain time period in which to make a complaint; this is six years from the event the consumer is complaining about, or three years from when they knew they had cause to complain.
The costs attached to filing a complaint with the Fos are next to nothing and often it is a more convenient route for individuals to pursue complaints than the courts. Where an adviser has retired or sold their book of business or the firm, the extent of their liability often depends on the sale agreement.
James Dingwall, chief executive of compliance firm Thistle Initiatives, said: “If you sell your company and you agree you are no longer liable for complaints, it’s the company that then purchases the company that has to settle its debt. If you just close down your company and receive a complaint, you are still under an obligation to deal with that complaint.”
Mr Cotter said if the adviser is an appointed representative, then in most circumstances the liability will remain under the principal firm, such as the network or firm providing the authorisation. If it is a limited company or limited liability partnership, there are other considerations that need to be taken into account when the business is closed.