Stopping the claims industry
Mark Graves is head of Pink network
How are we going to stop the claim culture industry which flourished under the FSA with customers continuing to be enticed by “we make any claim and it will not cost you a penny.com”?
Client integrity and morals seem to go out of the window when that cold call comes in claiming they are due thousands of pounds due to supposedly being mis-sold a financial product.
It can be hard for many of us to understand why a client we have looked after and given the right advice to is happy just to take a punt on getting a pay off rather than defending the adviser who put them in their homes.
Yet rather than discourage this process, it can feel like our governing bodies have hung the honest adviser out to dry.
The choice they face is settle for less than £550 or win in court but pay £550 Financial Ombudsman costs anyway, even if you’re innocent.
This cannot be right, can it? The Ombudsman Service would argue that they have addressed the issue by increasing the number of free cases a network gets to play with, but this is not finding a cure it is just prescribing medicine.
The way we have to deal with claims all but recommends the customer should go to the ombudsman and while I understand the logic of not suppressing any complaint surely there should be a down side for any unscrupulous clients if they are just trying to extort money as a settlement?
Here is a really simple suggestion: if a client uses a third party to make a claim, the third party company pays a £550 bond to the FOS to pursue the case and this bond money is only repaid if the case is successful. The claims company should also pay £100 on deposit for the adviser towards the time it has taken them to investigate it.
All of these monies are repaid to the claims company only if the case is successful. If a client goes direct to FOS they should only have to pay the £550 if it was clear there was no case to answer, I accept we should not discourage the genuine complaints and where the court rules that the advisor is given the benefit of the doubt I see no reason why these costs should not be split 50/50.
Would this work do you think in reducing the number of spurious cases?
Failing any regulatory action of this sort, the practice will continue where advisers and networks make commercial decisions to settle cases for no other reason than giving out a couple hundred quid, even if no complaint is justified, is more cost effective than going to FOS, surely this is not what the system was designed for, was it?