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Welcome to our blog, the place we get things off our chest. It's a mix of rants and raves, often about fees and the cost of financial advice, along with anything else we think you might find useful.

The complaints logjam

By Justin Modray, published 11 March 2021.

A key benefit of buying products and advice from Financial Conduct Authority (FCA) regulated firms is that if things go wrong and the firm doesn’t resolve to your satisfaction, you can refer your complaint to the Financial Ombudsman Service (FOS) for an impartial, binding verdict. And if the firm cannot afford to pay any resulting compensation, because its insolvent, you will likely be able to claim this from the Financial Services Compensation Scheme (FSCS) (within certain limits).

It’s a good concept that provides important protection.

But in practice it appears to be struggling, a lot.

The Daily Mail has reported FOS’s latest figures show 158,038 open cases, with more than one in six of these being opened over a year ago. Whilst the FOS CEO has just announced her departure.

Lengthy delays in resolving complaints helps no-one. Consumers with valid complaints may have to wait a year or more for compensation, whilst firms defending complaints face a long period of uncertainty which might affect their business meanwhile.

How can this be fixed?

I’ve no idea of the inner workings at FOS, but I suspect increased efficiency might help.

But ultimately there needs to be a reduction in the number of complaints.

In my view this will only be achieved through a combination of a more effective regulator and putting greater responsibility on consumers for what they buy (caveat emptor).

The FCA has let a number of high-profile scandals slip through its hands in recent years including LC&F, Woodford, British Steel pension transfers and dodgy investments held in SIPPs. All could have been prevented, or at least nipped in the bud, by a more pro-active regulator.

But consumers also need to take more responsibility for their actions. When an investment looks too good to be true, it is. Adverts for ‘safe’ investments paying 8% a year when banks are paying near zero on cash must surely ring alarm bells, yet usually seem to attract willing customers.

I fear neither will be an easy fix, so I doubt much will change in the next few years.

Meanwhile, regulated firms like ours will continue having to pay ever rising levies to cover the costs of FOS and the FSCS, effectively paying for the sins of others.