Mis-selling and suitability of advice make up 61% of all new complaints about financial advisers to the Financial Ombudsman Service (FOS), new analysis from leading behavioural finance experts, Oxford Risk shows.
It is urging advisers to make greater use of technology to deliver more personalised advice and to increase client engagement with the aim of delivering good outcomes and ultimately avoiding the risk of FOS complaints. It believes current market volatility further increases the importance of advice suitability.
Most recent FOS data for 2023/24 shows 1,459 new complaints about financial advisers with 892 – 61% – relating to the issue of mis-selling and suitability of advice. This increased from 48% in the previous year, which saw 1,823 new complaints with 884 relating to mis-selling and suitability of advice.
The percentage of suitability of advice complaints upheld in 2023/24 was 57% slightly down on the 62% upheld in the previous year, but ahead of the 49% upheld in 2021/22.
Other major issues behind FOS complaints were administration and customer services and charges, fees and commission as the table below shows. Administration and customer service made up more complaints in 2021/22 than suitability of advice.
| 2023/24 | 2022/23 | 2021/22 | ||||
| Type of complaint | Number resolved | % upheld | Number resolved | % upheld | Number resolved | % upheld |
| Mis-sale – suitability of advice | 892 | 57% | 884 | 62% | 570 | 49% |
| Administration or customer service | 418 | 32% | 503 | 30% | 687 | 29% |
| Charges, fees and commission | 89 | 41% | 101 | 37% | 133 | 23% |
Defined benefit pension transfers not into SIPPs were the most complained about product in the 2023/24 figures, accounting for 368 complaints, ahead of 241 relating to UCIS and non-standard investments. Other product areas in the top five included standard investments (169), personal pensions (155) and stocks and shares ISAs (123).
Defined benefit pension transfers not into SIPPs at 399 were the most complained about in the previous year (2022/23) followed by personal pensions (337), stocks and shares ISAs (318) UCIS and non-standard investments (311) and standard investments (269).
The latest data (2023/24) shows 205 resolved complaints to FOS related to advice and events from more than 15 years ago. Around half (45%) were upheld.
James Pereira-Stubbs, Chief Client Officer at Oxford Risk said: “Suitability of advice is clearly a major issue in the FOS figures and one that the financial adviser industry needs to address particularly given current volatility.
“It is important to bear in mind that complaints to the FOS about financial advisers make up a very small proportion of total complaints, and advisers deserve tools that make good practice and regulatory compliance easier with a tighter focus on client investment suitability.”
It is possible that the ongoing reliance on Attitude to Risk (ATR) Questionnaires is contributing adversely to investor risk suitability and overall dissatisfaction. This approach has never been fit for purpose, and financial advisers deserve a better, more holistic solution. Establishing a suitable risk level requires combining an investor’s financial circumstances and financial knowledge and experience of investing with their financial personality. In Oxford Risk’s latest blog article, you can learn more about establishing an investor’s suitable level of risk in a consistent, robust, and repeatable way – https://www.oxfordrisk.com/blog-posts/from-attitude-to-aptitude-why-risk-tolerance-alone-cant-determine-suitable-risk ”
Oxford Risk’s white paper, Behavioural Engagement Technology: Using technology to understand, map, and improve engagement in personal finance outlines how using AI and machine learning to engage investors can improve financial outcomes and grow assets under management for advisers by 10% or more.
Guides available on Oxford Risk’s website for financial advisers and wealth managers outline how using technology and behavioural science enables firms to tailor services more efficiently whilst communicating with clients more effectively.
It has developed its innovative ‘Retirement Income Suitability’ software solution which Just Group is feeding live data into providing accurate and up to date intelligence on health, mortality and product pricing. That enables to get accurate insight from the Oxford Risk solution on the level of Secure Lifetime Income (SLI) to provide for their clients, taking into account the client’s personal circumstances.
Oxford Risk, which develops software to help financial services firms support clients in navigating complexity, uncertainty, and behavioural biases, has created proprietary algorithms that rank products, communications, and interventions based on their suitability for each client at any given time.
