A New Time Limit Long Stop for Financial Services Complaints

Many people may not be aware but financial services is not subject to the Limitations Act 1980 that protects consumers. 

6 Years to Claim

The Limitations Act 1980 protects consumers in that they have up to six years from the date of purchase to make a claim for goods or services that are not of satisfactory quality or fit for purpose.  The 6-year limit is known as a ‘long stop’.

No Time Limit Claims – No ‘Long Stop’

Financial services are not subject to the Limitations Act meaning financial services firms such as insurers, mortgage lenders and financial advisers have an open-ended liability.  This means that consumers are protected and can make a claim for poor quality advice, products or totally unsuitable or not ‘fit for purpose’ products and services after 10, 30, 40+ years.  We have even seen financial advisers that have died, have a claim made on their estate.

No Long Stop Impact

• Financial adviser fees are not cheap.
• Professional indemnity insurance for financial services is expensive.  To give an idea of scale, for a 2 Adviser firm, they can expect insurance [premiums at £20,000 to £30,000 pa on top of c£10,000 pa in regulatory fees, ombudsman levies and compensation scheme levies.
• No wonder many financial advisers do not take on low income/low wealth clients as the liability is too big for the liability taken on.
• No wonder large insurance and banking groups offer no advice at all and you self select your mortgage or savings account.

Remember, these costs do not stop, long after you have received your advice or pension or mortgage.  It is an open-ended liability, and professional premiums must be paid to cover the liability for all the advice and products sold in the last 20,30 or 40 years.  Insurance costs keep building the longer a financial services business has been trading.

We estimate, for this website, our financial advisory business Roberts Clark IFS Limited has paid around £1m for the above costs alone over the last 25 years.

UK Financial Service Redress System Review

The Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) are currently conducting a review as the system is inundated with financial complaints and compensation claims.  The system is clogged with hundreds of thousands of complaints, many of which are false, fake or fraudulent and many fuelled by claims management firms that are making money by stimulating complaint numbers when in fact the product or service was fit for purpose. Personally, we have even spoken with friends who want help to make a complaint just because they bought car finance or loans or a credit card and were perfectly happy with what they had done until the found out they may get some money even if they were not mis-sold.

As part of the review, the government wants to introduce a 10 year ‘long stop’ i.e., you have 10 years to make a claim for unsuitable products or advise, much in the same way that solicitors and accountants have a 6 year long stop.

Comment

We will help if you have a legitimate complaint against a car finance company, pension transfer adviser or bank loan etc, but for most a claim may just be greed. 

We even saw one complaint (in the press) where the spouse of a former financial adviser, now retired, made a complaint to the adviser firm that her husband used to work for and had advised on and arranged the policy when he was an adviser.  Disgusting!

We suggest it is also the consumer’s own responsibility to regularly review their financials.  It is unfair for a consumer to make a compliant 25 years after they started a pension or life insurance policy having never bothered to review it since.  You do not leave your car for 25 years without maintaining it or checking the brakes, oil and tyres, why should your pension be left without checking it.

We hope for a long stop of a maximum of 10 years.  We would prefer 6 years, the same as other services and professions.   A long stop will:

• Reduce claims numbers
• Reduce fraud
• Reduce premiums
• Reduce financial adviser fees and offer greater access to financial guidance and advice for more that cannot afford to access it due to high costs.

We hope our premiums will be cut dramatically meaning we can offer more services more cheaply.