The Financial Ombudsman Service (FOS) dealt with a record number of complaints during the last year, with over half of them relating to payment protection insurance (PPI).
The Ombudsman handled 206,000 formal complaints about firms in the retail financial services sector during their 2010/11 financial year.
Over 105,000 of these complaints were specifically about the mis-selling of payment protection insurance policies which were designed to stop borrowers from defaulting on their loan obligations.
The big four banking groups – Barclays, Lloyds, RBS and HSBC – were responsible for more than half of all of the complaint cases dealt with by the FOS.
The number of complaints received by FOS about investments fell by 30% compared to the previous year.
The fact that so many people have to resort to using the Ombudsman is a worrying indicator of how many financial services firms tend to treat their customers.
Not only are firms giving their customers cause to complain in the first place, but they are then rejecting such a volume of legitimate complaints that their customers have no option but to seek adjudication from the Financial Ombudsman Service.
This is however mainly a poor reflection on the banking sector, rather than independent financial advisers.
IFAs accounted for just 1.5% of all complaints made to FOS last year, which is an improvement on the 2% complaint rate experienced in 2009/10. Even this figure was skewed higher due to a large volume of formal complaints about one IFA firm in particular.
Looking at the individual types of complaints, IFAs were responsible for a quarter of complaints to the FOS about pensions and 14% of formal complaints about investments.
These figures show that, whilst there is still room for improvement in the IFA sector, your chances of receiving poor advice and then needing to use the Ombudsman are significantly lower if you use an independent rather than a tied or multi-tied financial adviser.
Photo credit: Flickr/b.frahm
