Financial Planning network Rosemount Financial Solutions has accused the Financial Ombudsman Service of damaging advice firms by acting as a “quasi-regulator.”
Ahmed Bawa, managing director at Rosemount, said: “There is a definitely a problem with the way the FOS operates.”
In a letter to Emma Reynolds, the Economic Secretary to the Treasury, he said that while the FCA “has shown that it supports growth and wants to increase confidence for firms in our industry,” the FOS does the opposite and “won’t promote confidence or support growth.”
He said: “Unless there is real change in the way the FOS operates then, the FCA’s attempts at helping the industry will have little impact.
“It means it will be the FOS, rather than the FCA, that will be the most significant regulatory barrier that firms will have to jump.”
He said that there is a growing complaints industry and culture within UK Financial Services but that CMCs know how to present cases to the Ombudsman, using the right words and phrases to receive compensation, whether there is a legitimate complaint or not.
Mr Bawa said: “The FOS effectively acts as a cashpoint mechanism, transferring money from advice firms to the CMC companies. This cannot continue if the growth of the sector really is going to be properly supported by the FCA and wider regulatory system.”
He called on the FOS “to make its decisions “fairer and more proportionate, as its decisions have a huge impact on people’s lives as advisers.”
Mr Bawa said: “The way the FOS interacts with advice firms is central to the success or failure of our industry. Few adviser firms have the capital resources of big banks. No other types of business live with the threat that their lifeline and revenue from previous years could all be clawed back.”
A Financial Ombudsman Service spokesperson said: "We are an independent dispute resolution service designed to resolve cases on their individual merits taking into account relevant law, regulation and good industry practice, and with minimum formality. In the majority of cases we find that financial firms have acted properly.
“This year we’ve become the first UK Ombudsman to introduce charges for professional representatives - not only making our funding model fairer, but also encouraging better due diligence when they bring cases to our service.
“We’re also working closely with the Financial Conduct Authority and HM Treasury on an ambitious modernisation programme which will reform the dispute resolution system, making it fit for the future.”
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