It pays to be proactive and commercial when resolving a dispute.
Consider Financial Ombudsman Service dispute 242902. In this case, FOS determined that the financial services provider (FSP) should compensate the applicants a total of $9500 with interest at a rate of 5 per cent compounding annually from January 31, 2009 until the date of payment.
The applicants in this case had been clients of the adviser since 2006 and held an allocated pension and a term-allocated pension.
The applicants were originally seeking a refund of fees totaling $3500. The FSP made an offer to resolve the dispute however, the claim was rejected and the claim amount was amended to $19,183. It was then reduced to $18,039.
Later, it was increased to $29,307. The FSP then recalculated the applicants’ claim to $18,171, noting the total fees charged were in fact $5089.
What caused the dispute?
In December 2009 the applicants contacted the adviser via email and told him they were looking for low-cost funds that they could access without the requirement of ongoing advice.
The adviser responded on December 17, 2009 suggesting exchange traded funds or indexed funds, but leaving the decision up to the applicants.
In August 2010 the applicants responded to the adviser’s email indicating they had been struggling with the information, hence the delayed response. One of the applicants had suffered a head injury.
The adviser responded to the applicants’ new questions and concerns on the same day.
In December 2010 the applicants informed the adviser that they had found suitable products and wanted to roll over their allocated pensions. They asked the adviser to sell down all the non-cash assets to facilitate the transfers.
On March 29, 2011 the FSP received a complaint from the applicants.
The complaint was summarised in the determination as follows:
“The nub of the applicants’ complaint is the allegation that the adviser did not provide advice or any appropriate advice between July and December 2009 and that there was a failure to switch their funds into a readily available term-allocated pension in December 2009.”
The applicants claimed the adviser provided them with misleading advice about the low-cost options, causing them to delay switching to alternative providers. As a result, they missed out on an opportunity for better performance. They also claimed they paid fees for little or no service.
The determination
In finding for the applicants the following comment was noted:
“I find the FSP should have been more proactive in its approach to resolving the applicants’ concerns in December 2009. I am satisfied that the FSP must share a proportion of the applicants’ loss and refund a certain amount by way of fees.
The FSP was aware of Mr C’s disabling condition and should have taken a more positive approach to assist him.”
The lesson
Early in this dispute the applicants were seeking $3500 for the last 12 months of fees they had paid. Had the FSP responded to this dispute quickly, and before it landed at FOS, it may have been able to resolve this dispute for that amount.
The determination noted that the FSP should have been aware of his client’s disability and extra care should have been made when dealing with these people. It is unclear if the adviser first became aware that the applicants were “struggling with the information” in December 2009 or August 2010, however, the fact the applicants said they were struggling should have set off an alarm in the mind of the adviser.
When dealing with disputes a commercial approach should always be taken. The cost of getting to determination would have cost approximately $10,000, not to mention the loss of productivity.
Given the original quantum was quite low compared to the fees that FOS would have charged to resolve the dispute, the FSP should not have allowed the dispute to progress to determination.
In many instances, FSPs do not resolve disputes sooner because they’re clouded by emotion. Some FSPs will argue a point based on “principle”.
If you have ever caught yourself arguing with a client based on principle, you should hand over conduct of the dispute to someone else whose judgment is not clouded by emotion. Disputes based on principle can become destructive for an adviser and can cost the adviser more than just money.
