Friday, 25 April 2008

The Financial Ombudsman - once bitten

It's not often your phone call starts at the top - but if you phone the Financial Ombudsman that's exactly what happens!

A few years ago I made a complaint to the Insurance Ombudsman. He found in my favour and awarded an extra £500 to my claim against a car insurance company. At the end of the process The Ombudsman himself phoned me to ask about my experience of complaining. The Ombudsman was Walter Merricks.

Today Walter Merricks' professional diligence has landed him the high office of Financial Ombudsman. If you phone the Financial Ombudsman service it is Mr Merricks' own voice which greets you; explaining how he and his colleagues can help. It's a simple but effective method of proving to callers that his is not a faceless bureaucracy.

The Financial Ombudsman considers complaints from consumers about financial products from pensions to investments; bank charges to endowments. He has the power to make companies which sell these products stick to the rules and put things right if they break them.

I've won one, lost one with the Ombudsman. Both my complaints were about endowment selling. The first complaint took over a year because Abbey - the bank who sold the endowment (to this then financially naive 24 year old) - refused 90% of all complaints. Then the regulator, the Financial Services Authority, hit them with a record £800m fine and the bank reviewed its previous decisions in a new, more favourable light.

My second complaint took two years. I made it on behalf of a friend. After reading the file from the company who sold this endowment it seemed clear they advised buying it mainly for the almost £2000 commission they would be paid by the provider - not because it was the cheapest way to repay the mortgage. The Ombudsman didn't agree. Last month I discovered some new evidence and asked the Ombudsman to re-open the case. This time I wrote to Mr. Merricks personally.

Today a case worker telephoned on Mr Merricks behalf. After reviewing the case 'we're sorry' but The Ombudsman is still unable to uphold the complaint. Even though some of the 'facts' in the Financial Adviser's Advice Letter are wrong - it doesn't follow that his entire advice to buy an endowment becomes 'mis-selling'.

Naturally I am disappointed, getting hold of all the paperwork and writing the complaint took ages. But I'm a bit cross too. The Financial Adviser tells some lies (a repayment mortgage would have been cheaper than an endowment) but because he does correctly spell out the terms of the product he is selling correctly, that lets him off the hook. He's £2000 richer, his financially inexperienced client is much poorer, although now a little wiser.

Recently the financial services industry has come in for a huge, and largely justified slagging off. Complaints about endowments. Complaints about the high level of charges made by banks when customers go overdrawn. Complaints about payment protection insurance premiums added to loans which borrowers could never claim on (the self-employed for instance).

As customers we get the financial system we deserve. We owe it to ourselves to read the small print and ask all the questions - no matter how dumb they might seem. Why do we ask more questions about purchases which cost a few pounds than decisions which cost thousands? Our naivety is making unscrupulous salesmen rich. Walter Merricks can't protect us from ourselves.

When I was 24 the Abbey salesman told me that my endowment policy would produce a huge cash surplus and pay off my mortgage. Great! He gave me charts showing huge bonus payouts for every single one of the 20 previous years. The evidence was compelling and I believed him. Did I understand it? No. It was lunchtime, I had made an offer on a flat and I needed a mortgage. A big cash bonus in 25 years time as well? Fantastic, where do I sign?

Today the endowment I brought won't even repay the original loan.
Today I ask a lot more questions - about everything.

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