Personal Finance Society  

PFS reveals adviser concerns on CMCs

PFS reveals adviser concerns on CMCs
 Keith Richards, chief executive of the Personal Finance Society

The Personal Finance Society has revealed evidence of alleged malpractice among claims management companies as it continues its campaign to "weed out rouge ambulance chasers". 

The professional body claimed some CMCs issued "blanket calls for cash" and escalated complaints to the Financial Ombudsman Service despite advisers proving the client had received suitable advice. 

Last week the PFS embarked on a campaign to collect evidence of poor practice in the CMC sector, which it intends to hand over to the Financial Conduct Authority. 

Keith Richards, chief executive of the PFS, warned "unethical tactics" had been used to generate business in recent years, with the PFS receiving 40 complaints about questionable CMC conduct over the past week. 

One adviser apparently submitted evidence of a CMC issuing "blanket" complaints on annuity sales without confirming the allegations actually applied to a client's case.  

In another case a financial adviser claims they were able to demonstrate to a CMC how their client was financially better off because of their advice. But the complaint was still escalated to the Fos, which ruled the advice was suitable. 

One adviser, who wished to remain anonymous, told the PFS: "The claims management companies should be required to provide evidence of what they allege as they waste so much time without any responsibility for their allegations."

The FCA took over regulation of CMCs last year and has since warned the sector on unacceptable advertising, while barring a company over conflict of interest concerns and highlighting that low uphold rates could work against the CMC when it comes to authorisation.

The watchdog has also asked CMCs to record all client calls, a move which the PFS said should make it "relatively simple" to establish if a firm has strayed beyond its permissions.

Mr Richards, said: "Claims management companies claiming their work is ‘no win, no fee’ are misleading and this sort of practice needs banning.

"The cost of poor practices at a minority of claims management companies also impacts public trust and pushes up the cost of financial advice."

The PFS boss said advisers were "understandably unhappy" about those CMCs which "throw mud at walls in the hope that some will stick" currently face no financial penalty if a claim fails.

He added: "It is clear financial advisers don’t want claims management companies to earn the cream they skim off their wins by becoming more circumspect in their filtering of legitimate claims."

The PFS has promised to share its findings with the FCA. Last week Mr Richards admitted unethical tactics in the sector were likely "limited to a minority" but said they brought significant consequences for consumers and the advice profession. 

Ross Jefferies, financial planner at Panoramic Wealth, said: "As for the campaign to monitor what is more often than not, ambulance chasing, it can only be a good thing.