Alan Lakey and Derek Bradley are not easy to please. Between them, the Highclere Financial Services adviser and PanaceaIFA CEO have campaigned on everything from the Retail Distribution Review (RDR) and complaints long-stop to Financial Services Authority (FSA) fees and bonuses.
This time, they are taking on unscrupulous claims management companies (CMCs).
Last week the pair met with senior figures from the Ministry of Justice (MoJ), the organisation that regulates CMCs.
The sit-down with MoJ head of claims management regulation Kevin Rousell and principal compliance officer Antony Bolton, scheduled to run for an hour, went on for two.
Bradley said he was “genuinely surprised” by how open the MoJ was to their concerns, given the usual outcomes of meetings with government representatives.
“There was a real feeling that they honestly didn’t know how these companies impacted so strongly on smaller IFA firms in particular,” he said.
“They didn’t appreciate the hoops we have to jump through to defend our corner when CMCs go to an IFA firm and make a complaint.”
IFA firms are at a serious disadvantage when responding to complaints, Lakey said.
Consumers have the choice of going to the Financial Ombudsman Service (FOS) or to the court system. There is, however, one flaw, as Bradley pointed out.
Wrongdoing
“If the complainant goes to court and it proves unsuccessful, it means the FOS will not then accept the complaint,” Bradley explained.
“Yet if someone goes to the FOS, they can then go to the courts, which seems very unfair.”
In the court system, it is up to the claimant to produce the evidence. With the FOS, if the adviser fails to produce documentation absolving him of any wrongdoing, the result may be very different.
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“There’s a requirement for any business to keep records for six years,” Bradley said.
“Some IFA firms may keep them considerably longer but, when you do keep them for longer, you start to fall into difficult places with the Data Protection Act.
“You can’t keep them unless you have a good reason, and a good reason is not someone making a complaint.”
The lack of a long-stop makes cases even more difficult to defend.
Bradley and Lakey proposed a solution to the MoJ: remove from FOS jurisdiction any CMC-managed claim and place the resolution within the court system, in effect treating a complaint in the same way as a case that has gone to litigation – outside FOS jurisdiction.
Whether the regulator goes for that remains to be seen, but it appears the MoJ is prepared to move on a number of other concerns. The cost of setting up a CMC, at £950, is something the MoJ admitted was far too low. The difficulties of regulating a mushrooming industry are also apparent.
Consumers
“There’s not a rigorous process at the MoJ to prevent [rogue firms] from surfacing elsewhere,” Bradley said.
“They just create a new company with their friend or wife and get round it.”
Lakey and Bradley’s meeting forms part of a much wider debate: consumers are as exasperated as advisers when they receive unsolicited phone calls about payment protection insurance and endowment mis-selling, and there are plenty of MPs fighting their case. But for advisers, Bradley and Lakey could present them with their greatest hope.
