3rd June 2025

We don't need no stinking badges 6

Viewing classic movies can often throw up interesting parallels for the future. One of my favourite retrospectives is the Mel Brooks classic Blazing Saddles. 

The film probably would not get made today. It tells the story of a town out of control, much in need of a new Sherrif. Initially, the people of Rock Ridge were not too happy about the new hire however, they warm to him after realising that along with his perpetually drunk gunfighter pal, they are the only defence against a wave of thugs sent to rid the town of its population.

With this misty-eyed dose of 70’s nostalgia in mind and reading the latest numbers from the FOS, it seems that those Mexican bandits who did not seem to need ‘Stinking Badges’ have simply refused, like in the movie, to go away.  And yes, those CMC's continue in the eyes of many in the IFA world, to portray a world of plenty to hard pressed consumers in the troubled, distressed world of 2025

In times of hardship where else on earth can a path be laid to such potential riches as that carefully manicured by CMC’s, with the assistance of regulations designed in part, to actually stop it happening. 

The Financial Ombudsman Service (FOS) received 141,846 complaints in 2024, marking a 49% increase from 95,349 in the same period the year before. Of these, 33% were upheld in favour of consumers.

Some headline figures are: 

• 3,526 new mortgages and home finance complaints in Jul to Dec 2024, compared to 3,877 in July to December 2023 
• 4,345 new decumulation life and pension complaints in Jul to Dec 2024, compared to 3,996 in July to December 2023 

And amazingly even the dead now seem to be able to complain:

• 158 new complaints about funeral planning in Jul to Dec 2024, compared to 181 in Jul to Dec 2023.  

But worryingly, almost half of the batch of 2024 complaints were deemed to have come from ‘Professional Representatives', a new FOS rebrand for the so called ‘Badgeless’. 

Last month, the FOS introduced a new fee model to charge any of the 'Professional Representatives' who bring more than ten complaints a year to provide a fairer fee arrangement. I seem to recall similar penalty pricing for IFA firms back in the day. 

I had thought that when their regulation passed to the FCA some success would be achieved in rooting out the rogues and vagabonds that roamed the Blazing Saddle's Rockridge world they had thrived in. 

But amazingly (and that is the problem that FCA attempts at CMC regulation failed to address) so many are now regulated by the Law Society instead, simply by- passing the town of ‘Rock Ridge’s newly created, just for the job, FCA Sherrif’. 

Typical too good to be true marketing straplines such as: “If you bought life, savings or pension policies between 1988 and 1996, you may be entitled to compensation. Even if the policies concerned are no longer in force and you consequently have no paperwork relating to them” actually exist

Another went even further naming defunct provider firms and that “you can be holding the compensation cheque in just 7 weeks”! They say their approach is “holistic. “If you have been mis-sold one product, you may well have been mis-sold others. We provide a free audit of all your financial portfolio to ensure that no potentially mis-sold cases are overlooked”.

This tactic, simply put, is a ‘fishing expedition’ How can any firm, advisory or CMC determine a miss sale on a transaction 23 years ago with no paperwork or knowledge of the clients’ circumstances, needs and aspirations. Corbel Partners Paul Heath only last week criticised a "guilty until proven otherwise" attitude at the FOS and said this approach has enabled a proliferation of CMC-led complaints and overly defensive compliance processes within advice firms. Our experience over the years that Panacea has been going really would support his statement but that has been the case for years

As a profession within an industry, we continue with the struggle to restore trust in what we do. And all it takes to damage those aspirations are the actions of FCA unregulated CMCs who prey on the vulnerable, promising thousands in ‘compo’ for an event that is so far in the past that you do not even need any paperwork! 

For a good few years I have fought against this lot, with the valuable support and intellectual input of Alan Lakey. Indeed, many will know, we were responsible in no small part for having the regulation of CMCs put under the FCA remit. 

Advisers should realise that half of all 2024 complaints to the FOS were from CMC’s.  

A similar figure will no doubt manifest itself at the FSCS.

FSCS rules relating to what constitutes a qualifying loss situation are clear.

The claim for loss should only be admissible if the complaint relates to advice given by the firm deemed to be in default up to 6 years ago, or a further 3 years should the ‘Customer’ not have been reasonably aware they had grounds for concern. A maximum time scale of 9 years. 

Like the FOS, it should not cover investment performance or if a non-investment related product has settled a claim. We understood that the FSCS does recognise longstop limitations but subsequently found out that the FSCS has been paying compensation on a discretionary basis.

This is well worth a read, a few years ago I tried to get some sense of the scale of discretionary payments made by the FSCS to consumers who have long since passed their ‘complain by’ date but I am still awaiting a response from Ms Rainbird who left the FSCS in June 2023. We have no idea of the levels of discretionary payments over the last year, but it could be that ‘Behind every pound of levy is someone who has been compensated that perhaps should not have been’ in 2025?  

Now here is a thought that may deter those without badges. The FOS cannot investigate a case if legal action has been initiated by the client. If a CMC works on the basis that “if your complaint is not successful you can refer it to the Financial Ombudsman Service for free” then the regulatory view really should be that CMC engagement is the same as starting legal action and they should lose that fall back? 

Just a thought.

Business Development, Regulation