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ombudsman news

issue 54

July 2006

ombudsman focus - more than just small talk - keeping in touch with smaller firms

Half of all the cases we dealt with during the past year related to just twelve of the UK's largest financial services groups. Meanwhile, fewer than one in ten of all the firms we cover had more than two complaints referred to us. So while we have regular and consistent contact with the largest firms - we have very little direct contact with most of the firms in our jurisdiction - the smaller firms.

We spoke to the principal ombudsman, Tony Boorman, about some of the particular challenges this presents.

does the ombudsman service communicate differently with smaller firms than with those we deal with constantly-

Yes - there's bound to be a difference simply because smaller firms are bringing fewer cases to us. A lot of our focus naturally goes on dealing with those who provide the largest chunk of our workload - and that's the small number of the largest financial services groups in the UK.

The smaller firms form a very important constituency, but it's also a very diverse one, so there can be different challenges in communicating with them. We've been trying to better understand the needs of different groups of smaller firms and how our service operates in relation to those needs.

Large firms understand our process and procedures - they use them a lot. If your firm has hundreds of complaints with us each year, you'll know how we work and the approach we adopt towards different sorts of cases. And we'll also probably understand a lot about your firm, your procedures and practices over the years, and the products you have been involved with.

But none of that's going to be possible if your firm is involved in only one or two complaints each year.

what exactly do you mean by 'small' firms-

We don't actually have a measure of the size of the firms we deal with. By 'small' firms, I'm thinking of those that have just one or two complaints referred to us a year, or at most one or two a month. They're 'small' in the sense of being only occasional users of our service.

But an occasional user could have thousands of employees across the country, or could be a single adviser working from home. That's why I said they're a really diverse constituency.

We try to make our service meet the needs of individual consumers and I hope we can take the same approach with firms. The real question, then, is whether we explain our approach in the most appropriate manner for these firms - and whether the ways in which we work take sufficient account of their individual needs.

For example, small firms often need to involve and rely on their professional indemnity insurer. Typically - larger firms won't need to do that. This can mean many smaller firms feel they're not actually dealing with the complaint themselves. We have to be aware of that.

so tell us how you're addressing the needs of smaller firms-

I'll give you a couple of quick examples. Take the consumer contact division - they're our 'front-line' staff dealing with initial enquiries from consumers about their complaints. Here we're able to provide guidance early in the process. We identify firms that don't seem to have used our service much before and give them additional information about how we work.

And we're trying to improve the way we keep small firms in touch with progress on their cases. Often, after our initial enquiries, we might not need to talk to a firm about its case for several weeks. During that time we may perhaps be trying to get information from the consumer that we need for our investigation. Most small firms are keen to be kept up to the minute about exactly what stage their case has reached.

Of course, the adjudicator handling the case can always answer any queries on this. But we're looking to see if we can give firms a greater amount of this kind of routine information. Obviously though, we don't want to be showering busy people with unnecessary paperwork. It's a fine balance.

but can these firms find out about the ombudsman service before a complaint is made about them-

Absolutely. We want all the firms in our jurisdiction to be aware of our procedures - not just those who have complaints brought against them. Our website sets out our approach to a wide range of complaint issues which are relevant to smaller firms. And we're expanding the 'frequently-asked-questions' at the moment. There'll soon be a large section dedicated to the specific concerns of smaller firms. As well as that - firms can contact our technical advice desk directly at any stage with any questions they may have.

We also take part in a number of activities such as industry conferences, seminars and events. This is an important way of communicating with firms and helping them understand what we do.

do you ever talk direct to individual firms-

Oh definitely - yes. It's always really helpful to hear their views. And, of course, as well as helping us understand their concerns - it's a chance for us to correct any misunderstandings. Sometimes we talk to a group of small firms together. Mainly, though, we meet people from individual firms when we hold workshops and take part in roadshows.

There are a lot of these events throughout the year - and they take our staff all over the country. I went to Harrogate recently to hold an open question and answer session at the Financial Adviser Expo 2006. It was a good event. Really useful. In fact, if you consider how few complaints we actually receive from small firms, we spend a considerable amount of time talking to them - ensuring they're comfortable dealing with us.

what sorts of issues normally get raised at these events-

Something that clearly concerns smaller firms - it's also something that's regularly mentioned in the trade press - is the way we're funded. At the moment, each firm pays an annual levy. The amount depends on the firm's size. Each firm also pays an individual case fee if we handle a complaint about the firm and that case becomes 'chargeable' under our rules. But we don't charge a firm for the first two complaints referred to us each year - so in fact only a very small number of firms ever pay case fees at all.

We're reviewing our funding arrangements at the moment - I know Walter Merricks talks about this elsewhere in this issue of ombudsman news. What we're doing is consulting with the industry on a range of possible options. That includes the viability of increasing the number of cases for which no case fee is charged. We hope people will take a look at our funding consultation paper on our website - and respond before the end of July. That way we can take on board as many views as possible.

what other worries do firms have-

We often hear the same concerns. In fact some of them seem to have grown into urban myths. They bear little resemblance to the actual facts.

One is the idea some firms seem to have that if they haven't got any documentation, it automatically means they'll lose their case. Now obviously - when records are available they're very useful. But this may not always be possible - for a number of reasons. So we'll look - from the evidence currently available - at what's most likely to have happened. We look at things like what advice was given and whether it was appropriate for that particular customer's circumstances at that time.

Something else firms sometimes raise is the question of whether our adjudicators have this or that specific qualification. We have a lot of well-qualified people working for us - and a great deal of industry experience. But the real point here is usually overlooked.

Regardless of their individual qualifications - the really key quality we need in all our adjudicators and ombudsmen is something that can't simply be demonstrated by the letters they have after their names. It's the ability to stand back and listen to all sides of the story - to weigh up the arguments and arrive at decisions fairly and impartially.

A really big concern of smaller firms - particularly IFAs - is the fear that more often than not we'll decide in favour of consumers. We hear that a lot - but actually, the statistics simply don't support it. In terms of formal outcomes, in around two out of every three cases we find that the firm's response to the consumer's complaint was basically correct.

Of course, just because we don't formally uphold a complaint, it doesn't mean the consumer wasn't justified in feeling genuinely let down and disappointed by the firm. Many of the complaints we see could have been avoided in the first place if the firm had just made a better job of explaining its actions to the customer - explaining why its treatment was fair.

any more myths-

Well one that we often hear is the idea that it's in our interests to drum up complaints. Actually the opposite is true. We put a lot of effort into what we call 'complaints prevention'. We look at ways we can share our knowledge and experience with firms - to try to prevent complaints arising in the first place. One way we do that is by taking part in industry conferences, seminars etc.

Then there are activities such as publishing case studies and other feedback in ombudsman news. And our external liaison team is dedicated to encouraging firms to resolve their disputes themselves directly with the consumer.

Another point worth making here, I think, is that we filter out complaints that clearly have no merit - or that can be sorted at the earliest stage. That means fewer than one in every six initial complaints raised with us will turn into a case that we investigate. The first two of those cases are free so, as I said earlier, most small firms will never need to pay case fees. And that's definitely not a myth.

Photo: Tony Boorman

ombudsman news issue 54 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.