your questions answered

ombudsman service – budget and workload

I run a small firm of independent financial advisers. In 25 years of business, only a couple of complaints about my firm have ever been referred to the ombudsman service – and they were both decided in our favour.

I accept – rather reluctantly – that there is a case for having the cost of the ombudsman service met by financial firms. But I'm worried by reports in the press of a huge increase in your caseload. Does this mean that I'll now have to pay even more for a service I hardly ever use?

We handled a 57% annual increase in the number of new complaints we received in the financial year ending 31 March 2004 – and now expect to receive over 100,000 complaints in the financial year that has just begun. However, the funding arrangements we have in place, and which we and the FSA consult on in January each year, are flexible enough to make sure we always have the appropriate budget to deal with changing volumes of complaint.

Two thirds of our funding comes from the case fees we charge firms for each complaint about them that we receive from their customers. So the increased costs of handling more complaints will be met by collecting an increased number of case fees from the firms against which our customers complain.

Our research shows that your experience – in seldom having any complaints referred to the ombudsman service – reflects the experience of most small firms. In recognition of this, we've said that we will not charge firms a case fee for the first two complaints against them that are referred to us in any one year.

So for the current financial year, a small firm like yours (with just one or two FSA-‘approved persons’) will pay the minimum levy of £75 (the same as last year) and you’ll pay no case fees at all, as long as we don’t have to deal with more than two complaints about your firm during the year.

Our experience from previous years is that:

	74% of financial firms covered by the ombudsman service do not have any complaints referred to us, so will not pay any ombudsman case fee.
	21% of firms have no more than two complaints referred to us in the year, so will also not pay any ombudsman case fee.
	Only 5% of firms will actually pay a case fee to the ombudsman – with 68% of case fees coming from the largest firms, which comprise only 0.5% of all financial firms covered by the ombudsman service.

You will find more information about our budget and funding for the year 2004/5 – and about our estimates of the number of cases we expect to receive – by looking at the feedback statement on our plan & budget 2004/5.