IFAs set up 'aggressive' union

HUNDREDS of angry financial advisers are to set up a multi-million pound legal fund to defend themselves against what they say is a rising tide of unjustified consumer claims.

The advisers claim that the UK‘s compensation culture and a ?mistaken approach‘ to regulation by the Financial Ombudsman have resulted in many wrongful findings against them.

They say many advisers could be driven out of business as a result.

IFAs meet in Birmingham this week to form a defence union that will meet the cost of fighting mis-selling and negligence claims brought by disgruntled clients.

Consumer groups fear that a defence union could slow the pace at which complaints are dealt with by the Ombudsman and lead to a backlog of cases building up.

A Consumers' Association spokeswoman described the step as ?unhelpful‘. She added: ?We have great faith in the Ombudsman and its ability to make good decisions. We wouldn‘t approve of this.‘

But Alasdair Sampson, a Glasgow solicitor who is the driving force behind the proposed defence union, rejected these fears. ?The way the Ombudsman has decided some cases offends my sense of natural justice,‘ he said.

Simpson denied IFAs were simply trying to evade responsibility for mis-selling of endowments, pensions and other financial products.

But he admitted that the first successful claim for mis-selling of precipice bonds could prove ruinous to IFAs:

?The Ombudsman‘s provisional decision in this area is based entirely on a misunderstanding of the risk profile of these products. The Ombudsman doesn‘t seem to understand that every financial instrument has the capacity to fail.

?I know of IFAs who sold hundreds of precipice bonds and could now be ruined by the Ombudsman‘s attitude. On the basis that this case was decided, no IFA would recommend even a deposit account to clients in future.‘

Sampson said he expected ?hundreds‘ of IFAs to join the defence union: ?This is a nationwide problem. The existing Ombudsman system is not working - there is no way advisers can appeal against decisions and there have been many incorrect findings.‘

The Financial Ombudsman service, which is overseen by the Financial Services Authority, countered Sampson‘s claims. ?Last year, the Ombudsman received 1,297 complaints against IFAs under our jurisdiction and rejected 66% of them. It isn‘t true to say that we find against IFAs in most cases,‘ said a spokeswoman.

The Ombudsman has also changed its fees structure so that from April 2004 IFAs will not incur case-handling charges until more than two cases have been brought against them.

The IFAs behind the proposed defence union dismiss the fees revamp and an invitation to talks with the Ombudsman as being ?of no interest‘.

Sampson added: ?We have nothing to discuss with them. The purpose is to set up a fund to defend IFAs against unjustified complaints, not sit around and discuss issues. This is intended to be an aggressive defence union that will redress the balance in favour of IFAs.‘