15 Year Financial Advice Complaint Time Limit

15 Year Financial Advice Complaint Time Limit.

You may be aware that the finance industry regulator, the Financial Conduct Authority (FCA) has recently launched a Financial Advice Market Review (FAMR). The review is to look at the financial advice industry as a whole as it is thought that following the introduction of fees rather than commissions, many consumers now do not have access to professional financial advice given the cost barrier. In addition, many large banking groups that served the mass consumer with basic advice have closed their financial advisory teams down given that high-level professional qualifications are required as well as and advice fees being charged rather than commissions.

There is a huge financial advice gap where it is estimated that up to 25 to 30 million people do not have access to a financial adviser. This is why there is now the FAMR.

Why is the cost of financial advice so high?

Many of you may not have heard of the Limitations Act 1980. In simple terms this means that if you purchase faulty or negligent goods or services you have six years to complain and claim compensation or refund. Financial services is the only industry in the UK that is not subject to the Limitations Act. This means that when you receive financial advice your financial adviser is potentially liable for life. There is no "long stop". This is why fees that financial advisers pay to the regulator, the financial ombudsman service, the financial services compensation scheme and professional indemnity insurers are so high. The knock-on effect is that higher risk financial advice can be extremely expensive.

Introducing a 15 year long stop

As part of the financial advice review it is now being proposed that a 15 year time bar complaints limit be introduced for financial advice. Our opinion is that a 15 year longstop will have little or no effect on reducing a financial advisers liability and therefore the costs of getting financial advice. We believe that all people should be made to take greater responsibility for their finances. If you did not service your car for 15 years it would break down. If you did not service your gas boiler for 15 years you may kill yourself with carbon monoxide poisoning. No reasonable person would leave important things like this for so long and we believe the same should be said for financial services. If you do not review your finances on a regular basis then they are likely to break down as the law, tax and investment markets change all of the time.

It takes two to tango - 5 year long stop?

We suggest a more reasonable longstop should be no more than five years since you last spoke with your financial adviser. We accept that there are unscrupulous financial advisers and also financial advisers who perhaps are trying to do a good job but have simply made a mistake. If we are all servicing our finances on a regular basis any problems should be picked up within a five-year period if you are reviewing regularly.

There is responsibility on both sides and it is ridiculous for a consumer to have ignored their pension for 30 years and then when they come to retirement to find out that it is not what they wanted and to then still be able to make a formal complaint to the financial ombudsman service years after the advice was given. If the advice was negligent then a consumer should be compensated but a consumer should also be held accountable for not reviewing their finances on a regular basis. If a five year longstop were in place or with a caveat that an ongoing advice service should be taken then we believe the costs of financial advice would dramatically fall.