The Financial Ombudsman Scheme (FOS) has a relatively new database on its website. I believe it is a product of the Lord Hunt report to the FOS for the purpose of "opening up, reaching out and aiming high". The database provides the Ombudsman's final decision letters in redacted form, although policyholders are given names such as "Mr T" to protect their identity.
The website has a drop-down menu. This enables a user to select features that interest him or her. For example, they can select cases upheld or cases rejected. A user can also select a keyword such as 'annuity' if especially interested in those cases. In my view, two mortgage endowment decision letters call for special comment. These are DRN2059292 and DRN6815673.
DRN2059292
The hurdle rate to achieve the mortgage target was 8.5% and this was for a term of 25 years. We know from the other illustration projection rates, 7% and 10.5%, that the policy must have commenced between 1988 and 1993. Actuaries know from financial forecasting that substantial shortfalls were a real and significant risk, yet the Ombudsman says the endowment was suitable for any investor apart from one who was not prepared to take any risk! With-profits endowments were perceived as low risk and the probability of shortfalls, which was known to be high, was grossly underestimated.
DRN6815673
The main interest in this case is the Ombudsman's comments on p6. As is their wont, the FOS distinguishes between cases where there has been 'advice' and those where the firm merely gave 'information'. The policyholder is protected through the regulatory complaints procedure if she or he took out an unsuitable policy based on 'advice', but much less protection is provided if she or he was only given 'information' that did not count as 'advice'. The Ombudsman says that information which is product-specific is 'information', whereas information that is client-specific is 'advice'.
The moral of this case is that 'client-specific' equates to 'advice'. I would say that information which is specific to the policyholder's age is 'client-specific' and therefore it is 'advice'. As such, once 'advice' has been established, the policyholder is put in an enhanced position to succeed as a complainant.
I find these cases, combined with freedom of information requests, a most valuable source of establishing FOS idiosyncrasies.
Anthony Pepper, 13 September
