Nothing sums up Britain’s rising claims culture than the astonishing figures published by the Financial Ombudsman Service this week.

In its latest annual report, the FOS, which handles consumer complaints about financial services firms and products, reported that it had received over 305,000 complaints - 50% up on the year before.

The surge was driven in large part by a flood of complaints from ‘professional representatives’ - code for Claims Management Companies (CMCs).

The FOS said that around half of all cases are now submitted by professional representatives, double the percentage of the previous year.

Incredibly, nearly half the organisation's workload now comes from professional claims firms.

CMCs (or ambulance chasers as some know them) are becoming voracious in submitting thousands of claims.

One annoying aspect of this, from the FOS point of view, is that many of the claims are dropped. It’s not clear why this is but it could be that the CMCs decide, for one reason or another, that a particularly category or group of complaints is not worth pursuing, perhaps because there are juicier bones elsewhere.

The Financial Ombudsman admitted that a significant chunk of its resources are now spent handling, "thousands of withdrawn and abandoned cases", mainly from professional representatives. To try to tackle this avalanche of complaints, the service recently introduced charges for professional representatives who bring more than 10 complaints a year. However the charges are still low and will likely do little to deter speculative complaints.

The body is also working with the Treasury and FCA to try to 'modernise' the dispute resolution process to improve complaint handling but there is little detail on this and it sounds like a weak response.

So why does all this matter and why is more robust action needed? Isn’t it the right of every consumer to complain? This is true but I’ll suggest one possible solution later.

Does it matter too for Financial Planners and Financial Advisers? It certainly does with strong recent evidence that CMCs are beginning to turn their attention to financial advice firms such as wealth manager St James’s Place and others. CMCs will be licking their lips about the decades of financial advice cases that might come their way, of that I’m sure.

So what’s to be done and does anything need to be done?

There is no doubt that this is growing and costly problem and will require national action to prevent vexatious and speculative complaints rising inexorably and clogging up the financial services sector as the years pass. It could well be the case that the recent growth in CMCs reaches a level where it distracts decent financial advice firms and providers to such an extent that it requires huge resources to deal with it. This will push up costs for all and could well deter financial advisers from taking on more clients.

Of course, there is a right to complain but one solution could be to restrict this right to the formal channels provided by the FSCS, FOS and other bodies which deal with complaints. Complaining direct to these bodies is free and complaints, to the best of my knowledge, are handled fairly and professionally. For most people there is no need to use a CMC or other professional representatives. This needs to be stated and agreed by government and the regulators.

This might require a change of law but if there is a fair, free and professional complaints handling process, possibly with a legal right to appeal a judgement if needed, then I see no reason why complaints from CMCs cannot be rejected and consumers directed to use a beefed up FOS complaints system. Few consumers would object to a fair and free system being available.

One thing is sure, however, without tough action the prospects are grim. An avalanche of complaints will do little to improve advice standards in the UK and could just prove to be the worst news for legitimate, professional advisory firms.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin 

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