IFA Fee Reclaim

Choc63

My complaint against an IFA has been upheld by the Ombudsman but incredibly does not include her fee of £7000. When I spoke to the junior Ombudsman his initial reaction was that this should be included and had been overlooked (he thought the fee was part of the monies invested but in fact it was paid separately) but when he consulted with the main Ombudsman he changed this view to it not being repaid on basis I should just be given back the net amount I invested originally. On this basis she can keep misadvising and pocketing thousands of pounds. I am wondering if the Ombudsman just could not be bothered to re-do the paperwork. Is there anything I can do to get this money back either via the Ombudsman or some other avenue?

bowlhead99

Is this an initial assessment or a final decision being made? Generally if they have decided the merits of the case it is difficult to appeal, as an ombudsman won't overturn the decision of another ombudsman. But if it is not a 'final' decision already accepted by you, it would not hurt to argue your corner and try to show how you have not gone back to the position you would have been in without the bad advice?

What was the actual nature of the complaint? I expect one of the IFAs who is more familiar with the rules will be along to comment.

You would like to think that if you get sold some bad advice, paid for outside the cost of the product, and you lose money due to the bad advice, the total amount you're out of pocket by is the losses plus the charges for the bad advice. However, maybe it depends what that £7k covered. Was any of the advice relating to other products or planning or something that weren't mis-sales?

Let's say you paid 7k for advice on 700k of assets and you wanted the IFA to put you in a product where if the particular market you were in went down, you would have downside protection and still have your 700k after a few years. Well, 700k in the product but having paid a fee around the side, because the advice has a cost. Instead, the IFA puts you in a higher risk fund and all of a sudden you only have 600k on maturity. If she had put you in the right product or no product at all you would still have the 700k in the portfolio so you need 100k to put you back to where you would have been. But you still spent the 7k on advice, achieving the goal of having 700k in the portfolio after a few years in a down market.

I'm not saying that is how they worked it out or how it is supposed to work, because you haven't given us the facts of the case and I'm not an ombudsman. Just an idea of how you could look at it.

Seems like its something you should pursue if you don't understand the decision. They can surely help you understand the decision, or best case scenario perhaps change the decision, if in the course of explaining it they realise they have done it wrong.

dunstonh

On this basis she can keep misadvising and pocketing thousands of pounds

The job of the ombudsman is not to punish.

Is there anything I can do to get this money back either via the Ombudsman or some other avenue?

If its an adjudicator decision then you can appeal. If its an ombudsman decision it is he that will not change his mind then that is the end of it. You could consider court. However, you could end up losing the lot if you do that as the court would look at the whole complaint and could come to a different decision (courts are less favourable than the FOS to the consumer as things the FOS disregard are considered by the courts).

Normally, the fee is not recovered unless it is paid via the product.

On this basis she can keep misadvising and pocketing thousands of pounds.

The redress is likely to be greater than the fee. The PI insurance costs will increase indefinetly and the excess would rise and possibly become uninsurable if it continued. Without PI insurance the business closes. Complaints stats are also reported annually to the FCA. The FCA has a range of stats and a company showing above normal complaint averages would be waving a red flag to the FCA saying come and get me.

SallyG

"Normally, the fee is not recovered unless it is paid via the product."
so for belt and braces protection when using an IFA always pay by deduction from the fund? Any drawbacks to that way?
Generally speaking then an IFA will get away with poor/negligent advice - they can't be "struck off"/lose their licence?

bowlhead99

As Dunstonh alluded, if you get a lot of complaints you will get the regulator on your back. The regulator can fine you and shut you down. And they have a practical barrier to doing business if they can't afford their PI cover because it has paid out hundreds of thousands in claims and you are a high risk.

But sure, there is no physical reason why a well insured IFA who is about to retire and does not want customer referrals and does not mind appearing on the regulator's radar, could not charge a fee for nonsense advice and get away with it. You would assume most are not in that situation.

With some products you would want to pay a fee within the product anyway. For example pensions, you might only pay £60 or less to get £100 in the product, depending on your tax band, so you would want to pay from the product. With others like ISAs you might not want to pay out of your precious ISA allowance because you can only put £15k of new money in it a year and you would prefer not to spend a bunch of that on fees that could be handled with a separate payment.

IronWolf

Im intrigued to know what advice she gave you that cost £7k :eek:

Your_Hero

bowlhead99 wrote: »

But sure, there is no physical reason why a well insured IFA who is about to retire and does not want customer referrals and does not mind appearing on the regulator's radar, could not charge a fee for nonsense advice and get away with it. You would assume most are not in that situation.

About to retire or not, the advice stays with the adviser for life as current rules stand. So this scenario would not happen.


So the initial advice fee does not only cover the time spent researching, meeting with the client, presentation, implementing, paperwork etc. but also the ongoing regulatory responsibility for life.

bowlhead99

Sure, the FCA can still come after you, that doesn't go away just because the business closes. But presumably if you are well insured, the insurance is covering you for claims relating to a year even if they are filed in a later year?

Your_Hero

Many retired IFAs continue to pay for PI cover. So one upheld complaint can create a lifetime of increased premiums or worse no cover at all.

dunstonh

so for belt and braces protection when using an IFA always pay by deduction from the fund? Any drawbacks to that way?

In a lot of cases, it is actually the best way and simplest from a tax point of view (on pensions you get tax relief on your fee. On unwrapped, you get a simple audit trail that shows the costs of set up which can be deducted etc).

Generally speaking then an IFA will get away with poor/negligent advice - they can't be "struck off"/lose their licence?

Not sure where you picked that up from. Complaints figures are reported to the FCA annually. The FCA can and does remove authorisations.

But sure, there is no physical reason why a well insured IFA who is about to retire and does not want customer referrals and does not mind appearing on the regulator's radar, could not charge a fee for nonsense advice and get away with it. You would assume most are not in that situation.

A self employed/partnership IFA carries the liability for advice until death. So, even 20 years into retirement, that IFA could be paying out for bad advice. Only limited companies can drop their liability on closure. Advisers could be paying thousands of pounds a year for PI insurance long into retirement.

Freecall

dunstonh wrote: »

...... IFA carries the liability for advice until death.

An easy get-out then!