Learning from poor client files 

We've had a fun eighteen months navigating our way through the FOS's tortuous complaint-management process for a client of a firm which left our network precipitately in 2010, in order to go for direct-authorisation.  It's the usual kind of pattern - fishing-expedition letters, followed by a great deal of retrospective consideration, distributed unevenly over a very long time-period of inactivity, interspersed with sudden, sporadic spasms of activity, usually with very tight timescales.  Finally, after eighteen months of this, we were given sight of the client file, something previously denied to us by the departing Appointed Representative.

You may wonder how it is possible to accurately assess the basis for a complaint without having access to the original client file.  And you would be quite right to wonder in this way.  There is, in fact, a great deal about this redress process that leaves one wondering...

However, finally, we now had the client file and, in a strange kind of way, receiving it really made my day.  There was a time when handling these redress claims used to bring on a sense of nameless horror, as if I was walking through the pages of an H. P. Lovecraft novel.  Now, mercifully, I experience a certain frisson of delight as the sheer awfulness of this ex-AR's hidden activity unfolds before me through the pages of an ineptly compiled file - and this latest example is no exception to a pattern which has accumulated over several such cases.

Initially, as one contemplates the 190 pages of documentation, one experiences a slight surge of hope that perhaps, this time, the work will have been adequately documented.  And then one begins to realise that there has been systematic duplication of non-essential administrative paperwork, at the expense of mission-critical items that might have made a difference.  Next, one discovers that there is actually no chronological order to anything, so arranging the contents into a meaningful order so that reliable analysis can occur is going to require the services of a gifted clairvoyant.  

And, though I've reviewed some bad client files in my time, this one really is a peach:

  • No ToB or Letter of Engagement - not merely the absence of a signature, but no evidence that such a thing was ever supplied to the client
  • No evidence of initial disclosures
  • No AML process or evidence
  • No FactFind
  • No attempt at risk-profiling
  • No evidence of research
  • No product information relating to the (failed) investment
  • No Suitability Report!
  • No copies of contract notes.
When you come to think about it, one has to admire the ingenuity of an adviser, capable of constructing a one hundred and ninety page file, which doesn't contain any of these requirements - and breaches every single one of ValidPath's professional standards pertaining at the time!  It is our human capacity for wonder which sets us apart from shellfish, even when contemplating a car-wreck of a client file - and, as a kind of bonus, every record pertaining to the bad advice, squirrelled away in a dark corner, beyond supervision and oversight.

The process of reviewing this documentation teaches us a number of very clear things:
  • How fortunate ValidPath are to no longer have this firm as an AR
  • How poorly the client was served originally
  • The creative nature of the claims made by customers who have been tutored in the art of redress, which does tend to constrain one's expression of sympathy
  • How disinterested the organs of regulation are in accurately apportioning responsibility
  • How firms with this kind of ethical vacuity are given impunity to operate within a DA marketplace
Thankfully, ValidPath's standards on compliant file completion are clear, and accessible to all our Members.

Suitability2003
Kevin Moss, 19/10/2018