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Managing client dissatisfaction and complaints

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Diminution in value of investments following the COVID-19 pandemic

Many market analysts and Insurance lawyers are commenting that investment losses will give rise to an increase in mis-selling claims. This is due to the significant slowdown in international trade and spending as a result of the COVID-19 pandemic.
 
Although certainly of concern this is probably unsurprising news for you. You may have already heard from your clients on this topic, and if so, it is important to distinguish between a client grumble and an actual complaint.
 
At the end of February when stock markets started to take a real knock, it was extremely difficult to gauge the medium to longer term implications. And most stock market commentators and analysts held the view that investors might as well ride out the storm. 
 
Of course, once we first went into lockdown, many of the financial advisers we spoke to advised that they were spending a considerable amount of time discussing the position with their clients on the phone (or Skype, Zoom - but hopefully not House Party!). In the conversations which we had, most financial advisers said their clients were more concerned about ‘health over wealth’.
 
Certainly there were grumbles but most investors were sanguine and even the most pessimistic analysts believed that even the most heavily equity based portfolios would regain their value within a 12 to 18 month period (albeit that some individual companies would not survive). As reported in Money Marketing last week, the reality of course is that most advisers’ clients are in a mixture of equities, GILTS, Bonds, some in gold and cash and therefore losses to portfolios are likely to be considerably less impacted than the equity market drops. 


Recognising when to notify a claim


We saw a rise in claim notifications in early March but since then we have seen normal inflows of claim notifications. It is worth remembering that a client saying that they are unhappy with the performance of a fund is not necessarily a claim notification. That said, a client does not need to make a formal written complaint for this to be a claim notification either.
 
Knowing when to notify a claim needs to be judged on the specific situation: 


1.    Your knowledge of the investor – How do they typically perceive the performance of their investments? Are they generally ‘glass half full or empty’? What is their experience of investing?


2.    The reason for the complaint - Is the investor complaining that their investments have reduced in value because of the state of the world or because the state of the world has exposed the fact the investments weren’t appropriate in the first place (whether justified or not)?
 
If you have any doubts about a notification please do contact Howden if we are your Broker and we can discuss this with you. 

 
What do commentators expect to be the areas of claim down the line?


Investment funds

Non-mainstream investments are likely to be the area hardest hit. For example, we have already seen a number of Property funds suspended. Although the use of these investments has significantly reduced over the last few years owing to concerns from the Regulators and Insurers. In the crash following the Global Financial Crisis in 2008 this was a much more grey area as there were a lot of UCIS investments in place.
 

Pension transfers


It is expected that there will be arguments regarding transfers that took place while stock markets were at or near their peak. This is because some of those individuals would likely have been in a worse position than if they had remained in their schemes, in the short term. This will of course be mitigated by the fact that most transferees would go into a mix of Equities, GILTS, Bonds and cash. It also brings home the best practice argument about having other assets and cash balances to tide one through.
 
It remains to be seen whether there will be challenges from those who were about to transfer but were unable to complete due to logistical difficulties during the lockdown.  
 

FOS awards


Most commentators have talked about the recent slowdown of cases going to FOS but all have agreed that this will likely increase once we come out of lockdown. As with all cases where an unexpected event occurred we will have to wait and see how FOS view the foreseeability of a pandemic.
 
One of the positives we have seen is that advisers are in frequent contact with their clients at the moment. As mentioned earlier, we have seen in previous difficult times that regular contact with clients does tend to help keep complaints at bay.

Chris Davies

Chris' team of expert brokers specialises in Professional Indemnity for Financial Advisers, Accountants, and Insurance Brokers. They always work hard to get their clients the right cover for the right price. And Chris' deep understanding of risk management means that he can help clients mitigate their risks as well as insuring against them.