Article by Phil
According to Financial Consultants the new Labour government has confirmed that it will continue to support proposed legislation to impose fees on Claims Management Companies (CMC’s) who bring claims into the Financial Ombudsman Service (FOS).
A fee of £250 will now be charged to CMC’s who bring a claim to FOS. The new rules are designed to reduce the number of spurious claims being submitted to FOS not only by CMC’s but also by firms of Solicitors.
Sadly, we recently fell victim to one of these “spurious” claims. A Solicitors firm wrote to advise us that a former client had complained about the advice they had received and that they had not received their annual reviews. The letter from the solicitor quoted various obligations that we have under the Financial Conduct Authority (FCA) Conduct Rules about the way in which we provide advice.
We were suspicious however that the letter didn’t seem to make any specific reference to the former client’s individual circumstance. Rather, it was very generic making a number of sweeping statements.
It was confusing to us that the former client should claim that we hadn’t provided ongoing reviews, because we had seen them every year for the last 10 years. It also seemed strange that the client would complain about the original advice since we’d continued to advise them for 10 years since that advice, without any complaints. So, we decided to speak to the former client, just to clarify their issues.
It soon became clear that they had no real idea about what was being claimed by the solicitor’s firm. They had been called out of the blue and asked if they had ever used an adviser. From there the solicitor suggested that most advice had been “bad advice” in the past and that they could probably get compensation. It was also suggested that they would probably get extra money because they had been over charged.
Once we explained what the solicitor was claiming the former client immediately withdrew their claim because they agreed what was being suggested was a nonsense and they had been misled.
This is what the new legislation is designed to crack down on. Solicitors and CMC’s encouraging people to bring claims and then issuing generic claim templates without looking at any of the facts in an attempt to secure some quick compensation without doing any work. Using FOS effectively to do their investigation for them.
Pressure on the Financial Ombudsman
Over 80,000 claims were submitted to FOS last year.
Hopefully requiring a £250 fee will prevent this happening. Clients will have to fork out up front, or CMC’s will have to finance the fees which they are unlikely to be able to afford. They would have to pay out £20 million in fees to submit the same number of claims as they are currently.
The FCA has also cracked down on the fees CMC’s can charge customers for their “work”. This is now capped at 25% for compensation of less than £10,000. The cap reduces on a sliding scale down to 15% on any compensation awarded over £50,000.
It is hoped that the Solicitors Regulatory Authority (SRA) place similar caps on unscrupulous solicitor firms. Currently some are charging 40% + VAT on any compensation secured, which is far higher than CMCs are allowed to charge. Imagine getting £50,000 compensation and paying your solicitor £24,000 in fees!
Worth thinking about if you do have cause to bring a claim.
Financial Conduct Authority also under pressure.
We have reported previously on the measures that the Financial Conduct Authority (FCA) has initiated to help to combat financial crime in our helpful money advisor scam updates. But with only 10% of the UK population saying that they have confidence in the financial system, the FCA are clearly not doing nearly enough say Financial Consultants.
The Transparency Task Force (TTF) thinks so as well. They have just written to the FCA to ask why they have not supported a ruling by the Advertising Standards Authority (ASA) about the way unregulated advertisers are able to promote the business of regulated firms without being authorised themselves. It seems the FCA think this is a grey area and one that they can’t get involved in. But both the TTF and the ASA think they should be more proactive.
The issue of concern relates to the promotion of foreign currency exchange services by a company called Currency Wave. They are an unauthorised firm advertising on behalf of an authorised firm of Financial Consultants. The ASA and TTF say that they are passing themselves off as being authorised and say that the FCA should intervene.
The TTF is made up of a broad group of businesses from across the financial services spectrum who are concerned about the regulation of financial markets and want to improve them.
Good and bad reports from financial consultants.
The FT Adviser awards for 2024 were announced in late November. These awards are voted for by financial advisors based on our experience of their service levels. This reflects on who we might choose to provide products to our clients. Good service being an important consideration. So, who was the best platform?
Well. The top three five-star platforms were Quilter, True Potential and Fundament. Parmenion received four stars, along with the likes of Aviva and Scottish Widows. Meanwhile at the bottom of the list was Abrdn. (So much for fancy re-branding).
In terms of Investment Providers. Some of the best included Octopus, Investec, Royal London and Quilter. Whilst at the bottom, Abrdn were once again voted as the worst.
Financial Consultants are generally unhappy with service providers across the board. According to Parmenion, 90% of Financial Consultants have had to apologise to their clients for the poor service provided by their product provider. 20% of advisers have had to wait over six months for pension transfers to be completed for example. We would whole heartedly agree with this. We wait in endless queues to speak to providers on behalf of clients. Some of the service levels are truly shocking.
