A prominent financial adviser has called for additional regulation of claims management companies (CMCs). Writing in trade publication Financial Adviser, Philip J Milton, founder of Philip J Milton & Company Plc, said that: “the whole claims industry needs to be tidied dramatically.” Mr Milton was responding to a story in the August 15 issue where it was suggested that the activities of CMCs provided clear evidence of the need for a ‘long-stop’ to be introduced within financial services. The advisory community is currently vigorously lobbying Parliament for a time limit of 15 years to be imposed regarding the period in which a complaint regarding financial services can be made. At present, the Financial Ombudsman Service can adjudicate on complaints made within “three years from when the consumer knew, or could reasonably have known, they had cause to complain,” even if it is 20 years or more since the sale of the relevant product.
Devon-based Mr Milton is one of a select group of advisers in the UK who hold Chartered Financial Planner status, meaning that they hold qualifications well in excess of the basic Diploma required in order to give financial advice in the UK.
Mr Milton also writes from the other side of the fence, as his firm offers claims management services regarding mis-sold financial products, in addition to offering a full range of advisory services. The firm is regulated by the Ministry of Justice (MoJ) in respect of its claims management activities. He contrasted the willingness of the Financial Conduct Authority (FCA) to impose fines and other sanctions on financial advisers who breach its requirements with the more lenient regulation of CMCs. “The average firm is falling well short of
Mr Milton reserved much of his criticism for CMCs who fail to highlight the proportion of the customer’s compensation they intend to take in fees, and for those who imply that using a CMC gives the complainant a better chance of success. The company website says that it only charges customers for using its claims management services “if you need our care and guidance” and says that some customers with mis-selling claims are simply advised to table their complaint independently. He concluded his comments by saying: “Suggesting that everyone is likely to secure a more successful outcome by passing things to a claims management firm is wrong, if that is what is happening, and something needs to be done about it. Perhaps they should be compensating customers if they have not been honest about that.”
During the course of 2013, CMCs have been subject to additional regulatory requirements, such as being banned from issuing advertisements that offer cash inducements, receiving referral fees and entering into verbal contracts with customers. It is also now possible for a customer to refer a complaint about a CMC to the Legal Ombudsman if they are not satisfied with the company’s response.
Despite the introduction of these new measures, many politicians, consumer groups and industry commentators believe that regulation of the claims management industry is unduly lenient, and have called for the FCA to be given the power to regulate CMCs.