The ombudsman’s job is to protect consumers by adjudicating complaints – but are their decisions always right?
A recent court decision has revealed how making a simple error can undermine a case and cost someone making a complaint thousands of pounds.
As a result, some professional advisers are suggesting taking a complaint to court will give a better result than going before the ombudsman.
At Manchester High Court, a judge recently overturned a decision by the financial ombudsman which had rejected a claim of unsuitable advice against financial firm Zurich.
The court ordered the firm to pay Angela Lenderinck-Woods £223,000 compensation, which branded the ombudsman’s decision to turn down her complaint as wrong.
Complicated estate planning
The case involved complicated tax planning and has taken 16 years to resolve. Lenderinck-Woods took the advice when she was 80. Now, she is 96 years old.
Her financial adviser had made a mistake in determining Lenderinck-Woods was domiciled in the UK when giving her inheritance tax advice.
As a result, she was recommended to set up a gift and loan trust, which was not suitable to her personal circumstances.
The ombudsman agreed recommending the trust was unnecessary but held that this did not make the advice unsuitable.
In 2012, Zurich had offered Lenderinck-Woods more than £500,000 compensation, but quickly withdrew the offer on learning the ombudsman’s decision.
Different tests
The court decided she had received poor advice based on the financial adviser’s mistake, and that the error had led to her incurring unnecessary fees.
The financial ombudsman service is designed to offer consumers a cheaper and more informal way to deal with complaints against advisers and providers.
The basic difference between how the ombudsman views a case from a court is a judge looks at if a contract or rules have been broken not if the way someone treated a consumer was fair and reasonable.
The tests are different – one is evidence based and the other is an opinion.
A financial ombudsman spokesman said in most cases the ombudsman reached the same decision as an adjudicator.
“Where an ombudsman reaches a different conclusion this is often because new facts or evidence came to light after we gave our initial answer,” said the spokesman.
