By Maike Currie, 06 October 2010
Having a look through the Financial Ombudsman Service's complaints data is quite an eye-opener. The organisation is an independent body which settles complaints between consumers and businesses providing financial services. Among the new cases received by the Ombudsman, for the period from1 January to 30 June, there are scores of complaints about financial advisers.
Sesame had 108 new complaints made against it to the Ombudsman. Multi-tied network Openwork had 49 and multi-tied sales force
But it's not just financial advisers who have been found wanting. The above complaints pale into significance when compared with the 22,420 complaints made to the Ombudsman about
Life insurance companies were also not exempt -
The list goes on and on. (If you want more information about firms reported, a full list is on the Financial Ombudsman's website at http://www.ombudsman-complaints-data.org.uk/) And judging by the sheer size of complaints, one can't help but question the level of service and advice being offered by financial services - the biggest contributor to the UK economy.
But while on the subject of naming and shaming, I would like to flag up a financial institution which does not appear on the Financial Ombudsman's complaints list, but given the 'advice' coming from some of its staff, might warrant a place: The Bank of England.
Last week, deputy governor Charles Bean told Channel 4 news that a key aim of its monetary policy is to discourage saving. His words: "What we're trying to do by our policy is encourage more spending. Ideally we'd like to see that in the form of more business spending, but part of the mechanism that might encourage that is having more household spending; so in the short term we want to see households not saving more but spending more."
Sure, the UK economy does need all the help it can get, and households spending will boost growth. Or as John Maynard Keynes explained it - the danger with people saving more and spending less due to economic uncertainty, is that it runs the risk that the economy will slip into a self-perpetuating cycle of declining demand and output - he called this 'the paradox of thrift'. But is Mr Bean really justified discouraging saving?
Martin Bamford, director of independent financial adviser (IFA) Informed Choice, thinks not and says this is "terrible advice" from the Bank of England. "Low interest rates result in two things; lower mortgage costs and less of an incentive to save money.
"That people are using this as an opportunity to repay expensive debts and build their cash deposits is not much of a surprise. With so much uncertainty remaining about the future of our economic recovery, those in debt should keep repaying debt and those who are saving should keep saving," he comments.
Pensions expert, Dr. Ros Altmann is equally appalled at the Bank of England's astonishing admission, and highlights the impact on pensions: "This misguided policy has ignored the perils of low rates for pensions. Pension liabilities have soared, while annuity rates have plunged, which means people's pensions have been decimated. In an ageing population, such policies are dangerously short-sighted."
With interest rates at an all time low of 0.5 per cent and inflation consistently exceeding the Bank of England's target - savers have already seen the value of capital fall in real terms and in many cases are being forced to eat into their capital as they are unable to live on the income from their savings pot. Isn't it about time more is done for savers?
Mr Bamford adds that with the official figures for UK economic growth in the second quarter of 2010 showing it remains unchanged at 1.2 per cent, the fastest rate of quarterly growth in nine years, it is unlikely the British economy is in such dire need of the money savers are 'squirrelling away' just yet anyway.
Yes, the Bank of England's monetary policy is aimed at getting the economy back on the move, and rightly so. But may I suggest it refrains from dishing out simplistic, short-sighted financial advice, lest it too be added to the Ombudsman's complaint's list.
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