Posted: 10th May 2019

Financial Ombudsman Service cases already represent a significant workload and cost for firms. In 2017 / 18, there were 340,000 new cases, with the FOS estimating this will increase to 400,000 during 2018 / 19.

But now, the stakes are set to rise further. The FCA recently announced a significant uplift in the maximum award the FOS can make from the 1 April, more than doubling the figure from £150,000 to £350,000.

At the same time, a greater number of firms will be able to bring cases. Currently, only those with 10 employees or fewer and a turnover of £2m or less can bring a case to the FOS. But from 1 April this will be widened to include those with up to 50 employees and a turnover of up to £6.5m. This means an additional 210,000 businesses will be able to bring a case and awards could be higher.

With this in mind, it is more important than ever for firms to ensure they have the processes in place to minimise the number of complaints brought by clients and subsequently escalated to the FOS.

Analysing the complaints caseload

A key first step will be conducting a thorough analysis of your firm’s complaint caseload. This should take into account both FOS and non-FOS cases and, ultimately, identify whether there are particular products or service issues causing problems.

To do this, firms need to have sufficiently granular management information on the complaint caseload and be able to conduct root cause analysis to identify whether there are systemic issues that need to be addressed. From such regular reviews, it is then possible to consider whether there are mitigations that can be put in place.

As the name suggests, root cause analysis is about identifying the root causes of issues – not just the symptoms. It is vital to create solutions that eliminate these causes and to create a culture where issues are identified and rectified before problems escalate. Efforts should be focused on those issues likely to have the greatest potential impact.

How to make root cause analysis meaningful

Previous reviews carried out by the FCA have found many firms believe their root cause analysis is more tactical than strategic, and that they gather information more effectively than they use it. A key challenge, therefore, is to see the big, strategic picture from your analysis and act on what it is telling you.

Senior management engagement with root cause analysis is key and makes it more likely issues will be fully rectified. In fact, without senior management support, rectification is often impossible.

Using information to reduce FOS cases

The next step is to analyse what proportion and what kind of complaints are being escalated to the FOS. These rates should then be compared to the industry average. Each firm will have its own view on what ombudsman referral rate is satisfactory, but it goes without saying the lower this is, the better.

Key questions to ask include:

  • Are you satisfied complaints have been dealt with fairly and correctly by the team?
  • Is there anything that could have been done differently?
  • What are the sticking points that mean it has not been possible to resolve a complaint?

It is important to then use this information to inform and improve internal processes if your firm s to ensure these types of cases are significantly reduced in future.

Quality assurance and benchmarking

An important part of this evaluation process is quality assurance and outcomes testing. Looking at your FOS cases, are you confident you are delivering outcomes that are consistent? Are complaints-handling staff receiving sufficient training? Can you map the complaints journey through the organisation and track outcomes in a dashboard that assesses whether these have been fair to the client?

If you are concerned the FOS is awarding a high proportion of judgements against you, it is important to understand why. Are there any recurrent problem areas or themes? You may want to conduct a benchmarking exercise comparing your performance to industry norms. It is important that learnings are identified so improvements can be made.

Whatever role your firm plays in the financial services marketplace, one fundamental principle is likely to be the same: you want to treat your clients fairly and achieve good outcomes.

This article was first published on Money Marketing on the 5th March 2019

Matt drage

Matthew Drage

Director of Advisory Services

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