Complaints about the mis-selling and suitability of financial advice to the Financial Ombudsman Service (FOS) could be set for record highs after another year of increases, a study finds.
There were 884 resolved complaints about the mis-selling and suitability of financial advice in 2022/23, and over three-fifths (62%) were upheld in the complainant’s favour.
This signalled a rise on the previous year, when just 42% of 570 financial adviser or advice complaints were resolved in the complainant’s favour, according to data analyst Oxford Risk.
Further, the mis-sale and suitability complaints against financial advisers were far more regularly upheld than other complaints investigated by the FOS. Where customers complained about issues including charges, fees and commission, only a third (37%) of the 101 complaints resolved were in the complainant’s favour.
However, this was still higher than the 23% of resolved complaints during the 2021/22 tax year. Across all of the financial adviser complaints, 41% were investigated and found wrongdoing on their part.
Meanwhile, the second-most commonly complained about issues with financial advice were administration and customer service complaints.
Those complaints dropped from 503 in 2022/23 from 687 in the previous year, with a similar rate of complaints of around 30% being upheld on both occasions.
The findings follow a crackdown by the Financial Conduct Authority (FCA) on personal investment firms that give bad advice to customers. The regulator has recommended firms hold cash aside for potential compensation.
Under new proposals, any firm not holding enough capital would be subject to automatic asset retention rules to prevent it from disposing of its assets.
Firms urged to treat regulation ‘in correct spirit’
Following the research, Greg B Davies, head of behavioural finance at Oxford Risk, believes the trend among financial advice complaints will continue.
Davies says he “expects to see record numbers of mis-sale and suitability of advice complaints upheld in 2023/24.”
He added: “The regulatory trajectory and directives from the Financial Conduct Authority, such as the new Consumer Duty, show a growing focus on client investment suitability.
“Firms that seek to address the regulation in the spirit in which it is meant by following this trajectory will be better positioned to avoid these complaints than those that treat it merely as a tick-box exercise.”
