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UK financial advice sector heading for “record high” level of complaints


Consumer complaints about mis-selling and suitability of advice are continuing to rise and are increasingly being upheld by the UK’s Financial Ombudsman Service (FOS), new analysis from behavioural finance experts, Oxford Risk shows.

Suitability and mis-selling remain the most complained about issues for financial advisers and failure to address the growing regulatory focus will mean the industry heading for a new record high, Oxford Risk warns.

Founded in 2002 by leading decision science academics from Oxford University, Oxford Risk are experts in behavioural finance and financial well-being. They understand how people perceive risk, make judgements about risk, and behave in risky situations.

Complaints about mis-selling in the UK are significantly higher

Most recent FOS data for 2022/23 shows 884 resolved complaints against financial advisers for mis-selling and or the suitability of advice, and almost two-thirds (62%) of all complaints were upheld.

That compares with 570 resolved complaints in the previous year when almost half (49%) of all complaints were upheld while the previous year saw 573 resolved complaints and 47% upheld.

Complaints about mis-selling and suitability are significantly higher than any other reported issue and are growing year on year. The second highest issue was consumer complaints around administration and customer service, with 503 resolved complaints and only 30% upheld in 2022/23 and the numbers are barely changed compared with the last three years at 29% or 30%.

On average when looking at all consumer complaints against financial advisers in 2022/23, just two-fifths (41%) were upheld and the table below sets out the record over the past three years.

Dr Greg B Davies, Head of Behavioural Finance, Oxford Risk said: “Based on the data from The Financial Ombudsman Service, we expect to see record numbers of mis-sale and suitability of advice complaints upheld in 2023/24. The regulatory trajectory and directives from The Financial Conduct Authority (FCA) 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.”

Oxford Risk’s behavioural tools assess financial personality and preferences as well as changes in investors’ financial situations and, supplemented with other behavioural information and demographics, build a comprehensive profile. Its financial personality tests can measure up to 20 distinct dimensions, of which six reflect preferences for sustainable investing.

The firm believes the best investment solution for each investor needs to be anchored on stable and accurate measures of risk tolerance. Behavioural profiling then provides an opportunity for investors to learn about their own attitudes, emotions, and biases, helping them prepare for the anxiety that is likely to arise. This should be used to help investors control their emotions, not define the suitable risk of the portfolio itself.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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