Fos is the elephant in the pension freedom room.
Surely advisers should be able to give a recommendation, but assist a client with their wishes.
I had asked the panel what they saw as the main risk facing the advice sector arising from the new pension freedoms.
After some sage words from Schroders’ James Rainbow on the paucity of advisers to service what could be potentially huge demand, Intelligent Pensions David Trenner took his turn and began simply: “Three letters: F-O-S.”
One or two advisers in the room spontaneously applauded.
Hosting FTAdviser’s two full-day conferences in London and Birmingham this week on pension freedoms and the effects on at-retirement advice, I lost count of the amount of times the ombudsman was referenced.
During questions following a presentation by the Financial Conduct Authority’s David Geale, the subject came to a head in a back-and-forth-exchange with several advisers insisting that rulings often ignore contemporaneous regulatory requirements and display a flagrant consumer bias.
For his part, Mr Geale said reviews of past decisions had found no evidence of anomalous conclusions being reached. Effectively there was an agreement (of sorts) to disagree.
The concern, as articulated by one adviser during a question to pension minister Steve Webb, is that advisers will help clients seeking to take more control - and therefore more risk - over their pension savings post-April, only to face costly claims many years down the line.
As we reported on Tuesday, Mr Webb’s response had been to ask Mr Geale how to ensure advice is hindsight-proof. It soon became evident it’s not really the FCA that advisers fear.
The consequences, variously cited by advisers over the two days, is that advisers may simply choose to steer clear of clients seeking to make contentious moves, such as switching from a final salary scheme (which actually will typically require advice to be taken) or moving into buy-to-let.
Maggie Craig, the watchdog’s head of policy for savings, investments and distribution, said in her speech on the second day that advisers would need to exercise ‘case-by-case judgement’ in deciding whether to walk away from a request or make the recommendation and assist anyway.
This is all a tremendous shame. Surely advisers should be able to give a recommendation, but assist a client with their wishes. Many have said they can and will subject to correct documentation; others are less bullish.
Now I’ve been on the record as questioning the objectivity of Fos in the past, but for the purposes of this discussion I don’t think it’s relevant whether or not it is a true independent arbitrator, rather than the “consumer champion” as once proclaimed by the regulator’s former chairman Lord Turner.
Fans of Baudriadian postmodern theory will attest to the reality of interpretation - the less pretentious might simply refer to the old adage: “If it looks like a duck and quacks like a duck, it’s probably a duck.” Or in this case, the elephant in the room.
Basically: if advisers fear the Fos and revise their service accordingly, all the protestations of the regulators will count for nought.
I’m open to the idea that Fos is consistent and that we in this sector (including me, as I spend more time listing to advisers than any other group) might view things askance.
I simply maintain it is important the dearth of advisers we do have, to highlight the pertinent point made by Schroders’ Mr Rainbow, are not scared to provide as much help as possible to clients. This is in many ways going to be one of the key determinants of the success of the reforms.
So how do we improve this potentially pernicious situation?
Ideas here range from simply ensuring advisers are protected against claims an age after advice was offered. Commendably, albeit belatedly, the FCA is recognising this and Mr Geale confirmed at our event the regulator is set to consult more formally on this issue in the near future.
Others include a suggestion from Mr Trenner that Fos use independent panels of sector experts, maybe even advisers themselves, in contentious cases to counter claims their staff lack the qualifications or experience to adjudicate complex financial cases.
It could be a matter of ensuring that decisions are much more grounded, or at least seen to be such, in the regulatory rules, so that advisers can have certainty over the advice given. An FCA call for evidence found no evidence that it changes regulation with the benefit of hindsight.
I’d like this to be the start of a debate in how we improve the relationship between our overseers and arbirtrators and the sector.
As one adviser said to me during my day in Birmingham: this is a great sector doing really valuable work, which is only getting more important in light of the pension changes. It is only clients that lose out if its confidence is undermined.