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Risky investment sales cause of most complaints to financial ombudsman

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THE selling of risky investments to unwary customers and poor client communication during compliance projects are the issues which generate the most complaints about Channel Island finance firms, the disputes mediator has said.

Douglas Melville CIFO office Picture: DAVID FERGUSON. (22533127)

Speaking at the monthly Chamber of Commerce lunch, Channel Islands Financial Ombudsman Douglas Melville said that in the banking sector more complaints were made to him about remediation projects than any other issue.

Tighter regulation of the finance sector over the past decade has meant that more information, such as up-to-date identification and proof of address, needs to be requested from clients more frequently.

Mr Melville said that many firms could improve their methods of requesting client details and that he had seen a number of cases where firms have closed bank accounts after only sending letters to their customers without even emailing or calling them to check receipt.

‘The large amount of remediation projects which are ongoing are generating huge numbers of complaints,’ he said.

‘Small ones, mostly – irritant complaints. It is where you [finance firms] are doing what you think is necessary to meet regulations and you do it by mail. What is happening is firms are sending out lots and lots of letters and if they don’t answer them then the account is closed.

‘Then you find out that they didn’t get your letters because in some jurisdictions the mail isn’t very reliable. In other cases customers get so much mail that they receive an important letter and they think: “Great more marketing”.

‘You have your complete management systems and wonderful technology and you have the ability to call or email them, so it is perhaps reasonable for us to expect that you would. If you are not getting an answer to mail, the solution is to try another avenue of communication – not to close the account.’

Mr Melville, who was appointed as the first Channel Islands Financial Ombudsman in 2015, added that in the field of investments, mis-selling risky investments to customers was the biggest issue.

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‘On the investments side, it is the same issue which we are seeing around the world – the suitability of investment advice,’ he said. ‘People are being pushed up the risk curve when seeking yields. They are being experimented on or talked into things when they don’t understand the risk.

‘Sometimes they understand the risks and we ask a lot of questions to tease that out of them. But if you have a low-risk investor in a structured product which has a magnified risk associated with it then that is clearly a product that has been mis-sold.’

The ombudsman has the ability to investigate complaints concerning banking, lending, money services, insurance, pensions and investment services and can order firms to pay settlements and compensation. He can be contacted on 748610 or at enquiries@ci-fo.org.

Ian Heath

By Ian Heath
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