Adviser trade body calls for Ombudsman review

The Association of Independent Financial Advisers (AIFA) has called for a comprehensive review of the Financial Ombudsman Service (FOS).

AIFA is concerned that the Ombudsman is creating a second tier to the regulatory structure. AIFA is calling on all political parties to review the FOS as part of any wider examination of the regulatory structure in the UK.

AIFA has called for a review of FOS to look at giving IFAs the same legal protection as other UK professions, the introduction of a no loss, no-fee system and including complaint management firms in the Ombudsman’s annual levy.

Chris Cummings, director general of AIFA, said: “Now is the time to review the work of the Ombudsman. It should be a mediator between disputing parties rather than the ‘judge and jury’ of firms’ activity.

“We are concerned that the Ombudsman has become a second tier regulator to the Financial Services Authority (FSA). This was not intended when it was introduced. FOS needs to be a smaller, cheaper operation, sharing resources with other parts of the regulatory structure. FSA staff must also have a better understanding of how the rules they write can turn into unjust complaints and sharing resources could deliver this objective - and reduce the costs of both organisations.

“The lack of a definitive long stop means financial advisers are subjected to infinite liability. Despite the very few cases brought against IFAs and the significant amount of consumer trust the profession enjoys, it is completely unacceptable that IFAs should be subjected to rules no other profession is.

“And, given the Ombudsman refuses to increase the number of free cases from the current three per regulated firm, small firms can find themselves worried about the burden of case fees. IFAs should be protected from erroneous claims with the introduction of a no loss, no-fee system.

“The Ombudsman has undoubtedly got some decisions right this year. Reducing the IFA levy by 12.5% in January was a welcome recognition of the small number of complaints received by IFAs. In this instance we’re glad the FOS listened to us.

“However, funding of the Ombudsman still remains a serious concern. At present 79% of FOS’s funding comes through the case-fee system, with the balance through the annual levy. It is clearly unfair for firms cleared of any wrong doing to be paying such a large percentage of FOS fees. It is therefore essential that a National Audit Office review of this funding is undertaken.”