Gill Cardy wonders what makes an ombudsman fit for his function?
No-one argues with the idea of good regulation to protect consumers – together with an ombudsman to address complaints when things go wrong, and of course a scheme to provide compensation if consumers should be left out of pocket by the failure of their advisers or providers.
So why is there so much argument about the system of regulation, the efficacy of the ombudsman service, and the function of the compensation scheme? When those concepts cannot be challenged, how did we end up with a system that causes so much conflict?
Skillset and Mindset
As far as the Financial Ombudsman Services is concerned, there are two key issues : qualifications and consistency.
The FOS’s chief executive recently said that forcing all her staff to be ‘as qualified as ombudsmen’ would lead to a quadrupling of case fees – a mathematical nonsense that I can’t be bothered to actually challenge here.
Explaining herself, she noted that the required skill set is that of a judge, not a financial expert. Which led me to wonder about the qualifications actually required of a judge?
Worldly Wise
“Most judicial posts will require a relevant legal qualification that has been held for either five or seven years.” Furthermore, they have to be trained to be a judge by going to the Judicial College.
So, given that myth-busting is all the rage, this is a good one to start with.
Then I wondered what being a judge was really all about. And I found this quote from the Lord Chief Justice:
“When taking the judicial oath judges and magistrates swear ‘To do right to all manner of people after the laws and usages of this realm without fear or favour, affection or ill-will’ … Many qualities are required of a judge… He or she must of course know the law, and know how to apply it, but the judge must also be wise to the ways of the world.”
Well, that’s another myth knocked on the head then. These judges/ombudsmen must know the law and how to apply it, and also be wise to the ways of the world. That sounds like a combination of qualifications and experience to me – oh, and there’s mention of continuing professional development too.
All of which brings me on to the little matter of consistency – and I’m not talking about consistency in decision-making, here. That subject is for another day…
Who’s Judging Who?
No, remembering that this isn’t just about financial adviser qualifications, then – given the vast remit of the regulator and the ombudsman service – if not everyone who is required to opine on a complaint requires full industry qualifications, why do all advisers need full industry qualifications to advise on similarly straightforward questions in the first place?
If the regulator thinks that clients deserve proper advice from properly qualified advisers who understand ‘the laws and usages’ of the financial world, then justice can surely only be done when their complaints are assessed by properly qualified adjudicators and ombudsmen who also understand those same ‘laws and usages’.
Compare yourself with judges, not with financial experts, if you want. But either way, it’s a high standard, and advisers would respect the Ombudsman’s decisions more if he walked the talk and judged us with appropriate expertise on the subject matter.
