Complaints, Culture and Claims Management Companies

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3 February 2020

With calls from MPs and an ex-regulator for the FCA to write to 160,000 consumers who transferred a Defined Benefit occupational pension in the years 2015 through to 2018, to inform these individuals of the concerns the FCA have publicly raised following the findings of the current FCA review into DB pension advice. Whilst this may not come to anything, we would all do well to remember that one of the FCA’s three operational objectives is to secure an appropriate degree of protection for consumers.

We have already seen that the FCA were happy to spend money on advertising PPI claims with the Arnie dummy. So, the precedent exists. The FCA rightly continue to champion, the cause of the consumer, no doubt their next update on the DB pension review will be cause for more headlines.

The requirement that all Claims Management Companies (CMCs) be FCA authorised during 2019 has brought a level of control and hopefully limited the lead generation activities of some of the more unscrupulous firms. However, many of these firms have deep pockets lined with the gift that just keeps giving, the typical 20% commission/fee charged by the CMC for assisting with claims. I use the word ‘assisting’ as investigating seems a little OTT when the tailored complaint letter is very often a templated letter with spaces for consumer information, a few generic tick boxes and a signature.

However, as the DISP handbook tells us, a client only has to inform the firm whose advice/ service etc they are unhappy with and the firm.  It is then the firms’ responsibility to investigate.  Whilst this works well for the consumer and also the CMC, it can cause even the best, well run dispute teams, or the directors of a smaller business some headaches if numbers increase.  It also means the firm is often being asked by this templated approach to respond to questions regarding the advice that was not common practice at the point in time the advice was given. Capacity for loss assessments for investment advice which pre-date that requirement and triage processes for DB advice given before the regulatory requirement.  These points take time to respond to in a way that closes the issue rather than permitting the CMC’s to then refer to FOS.

It appears that many consumers are not concerned by the 20% reduction in any payment as the “give us a call and we do it all approach” of the CMCs can be very enticing to a consumer who hears how much they could receive for a single phone call.  With increasing advertising campaigns, consumers are being bombarded with promotions of how easy it all is.

Recent comments that CMCs and financial advisers need to work more closely together for the benefit of consumers, emanated unsurprisingly from the CMCs and not financial advisers. The PFS as recently as January 2020, asked advisers to whistle-blow on rogue CMCs where the PFS claim, “there is a concern firms are straying beyond their permissions, for example, by drifting into regulated advice when they do not hold the relevant permission” and going further stating “CMCs must not be allowed to stray into regulated financial advice or encourage consumers to make speculative compensation claims when there is no evidence of poor advice.”

Clearly there is work to be done before both parties are willing to work together.

There is no doubt that those consumers with genuine issues should have their concerns fully and fairly investigated and where detriment has been caused, appropriate redress should be made.

If firms have a positive culture of engagement towards their consumers, not simply at the point of advice/sale, then those same consumers may not be as easily tempted to pick the phone to a CMC.

Advisers who are always available (within reason) and who will explain for that extra few minutes,  their suitability reports explain not only what but why, that are tailored and client-friendly, may well be delivering a service that creates a relationship that encourages their client to make the adviser the first point of call and not a CMC.

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