External dispute resolution processes are necessary, but the legacy of the genesis of this process is starting to have repercussions and consequences. One aspect is: what is a dispute and what is a claim? Are these concepts treated as one and the same?
Financial Ombudsman Service Ltd (FOS) is a private company which derives its jurisdiction from a contract with its members (i.e. the applicable FOS Terms of Reference). Consumers can make a claim, any claim and they are on the case. They now employ hundreds of people, so it’s a good business to have.
When a decision is handed down, the claimant has a settlement and where this is clear, fair and understood then it’s probably a very good outcome. We are all after seeing consumers receive good advice. It is when a decision is clouded with uncertainty or the adviser does not feel that they have had a fair hearing that this whole process starts to become one-sided.
Recently a Victorian court has cast doubt on the reviewability of FOS decisions. Where a public (i.e. governmental) body makes a decision of an administrative nature, a person aggrieved by that decision can ask the Court to review the decision.
In reviewing the decision, the Court will consider whether or not the decision-maker respected the boundaries of the powers and functions formally assigned to them. This process is known as “judicial review”.
An adviser affected by this decision in affect has no right of reply ,and this is not fair. The decision can ruin an advisers business and reputation, they may lose their ability to get PI insurance, lose their licence, forced into a sale of the business. All because they have no right of appeal or a review of the case.
Even murderers get to appeal.
One of the issues is that FOS will determine that each separate claim for the same client will mean separate settlements. This may have implications for scaled advice where multiple SOA are issued.
There have now been several cases where the claimant has simply wanted blood, and yet a settlement has been made. All advisers need to provide good appropriate advice but they also need an opportunity to appeal if they believe their side of the story has not been heard and understood.
The Catch-22 is that technically the clients are owned by the licence holder.
How many licensees want a long drawn out case with FOS? Do they want to settle quickly?
And if so, does the adviser even have a voice?
With the changes in FOFA, I assume there will be changes in terms of reference to advisers agreements with their licensee, how many advisers are asking to read this fine print now?
Too many questions, not enough answers.
About Brian Boggs
Brian Boggs is co-founder of Leading Minds Academy and principal of Information, Learning And Implementation, providing consulting services to financial product manufacturers, licensees and financial advisers.
He is a stalwart of the financial planning industry with over 32 years’ experience. Under his leadership, Wise Financial Services Pty Ltd became a national award-winning financial services company, managing client’s accounts worth millions of dollars.
Specialising in helping advisers grow their business, Boggs is a sought-after public speaker, regularly appearing at industry conferences and PD days.
