Perhaps it’s not surprising to see that the number of complaints has risen sharply over the last 12 months. Annual data released by the Financial Ombudsman Service (FOS) showed that complaints about pensions and investments had risen by 91% in 2020/21. The number of overall complaints stood at almost 21,00 from a total number of 280,000 complaints, which is around 7.5% of the complaints received. This figure is up from just under 11,000 the previous year.
The pandemic has probably had an impact on these figures as the value of pensions and investments has fluctuated considerably and one point after the first lockdown the market was down over 20%. Markets have recovered strongly of course, but people do panic understandably. Especially those who haven’t got a close relationship with an adviser to re-assure them.
Once again, banking and credit issues drew the most complaints with over 170,000 followed by over 40,000 for insurance and still complaints about PPI.
In context, the number of pension and advice complaints are much lower even though they have increased, but still only 7.5% of the total dealt with by FOS.
In terms of the complaints themselves, 31% of investment complaints were upheld (meaning that 69% weren’t) and only 22% of pension complaints were upheld (meaning 78% weren’t upheld).
That’s actually pretty re-assuring. No one wants a complaint, and no one wants a client to feel the need to complain. But in context the numbers of complaints with grounds for compensation are really very low.
When you drill down further into the figures, in terms of pension complaints over 3,000 were about Self Invested Personal Pensions (SIPPs), which have been in the news recently. The uphold rate on these complaints was just over 50%.
That’s perhaps not surprising. Only this week FOS ruled in favour of a client who had been advised to transfer his pension into a SIPP back in 2011. In this case (as with so many at the moment) the advice firm had only advised on the suitability of the SIPP as a product rather than advising on the suitability of the investment itself. Because you can hold all sorts of assets and investments inside a SIPP advice firms previously felt that they were not required to advise on the investments held. This is not the case. FOS ruled that the advisers should have looked at the investment to be held within the SIPP, in this case a foreign property. It turns out that this property has lost almost all its value and so the client it out of pocket.
It is worth noting that almost half of the complaints are actually about customer service and poor administration rather than mis selling and financial loss, which is also re-assuring.
We can report another year without a single complaint again. Something that we are very proud about and which we work hard to deliver.
The FCA are now looking to improve customer protection even further by introducing new obligations on advice firms. The current proposals being considered will “increase” the requirements for firms to go further than providing suitable advice and acting in a client’s best interests and moving towards a requirement to provide “good outcomes”. These improvements are widely supported will create challenges for firms.
One area that will be challenged is the issue of percentage charging, where customers are charged based on the size of their funds rather than the amount of advice they receive. The other is the overall charge made for advice relative to the benefits of the advice.
Currently this is not necessarily a consideration.