FOS needs structural change, report finds

An independent review into the Financial Ombudsman Service (FOS) has found its organisational model has reached the end of its effective life and needs radical change. 

The review, commissioned by the FOS Board and conducted by CameronRalph Navigator, is the first review since the merger of its predecessor schemes. 

While CameronRalph Navigator found FOS performed well on a number of fronts, it identified a high level of frustration coming from financial services providers with regards to timeliness issues, dispute backlogs and the overall lack of efficiency. 

“The primary issue identified by our analysis is the configuration of FOS into a series of discrete 'production line’ steps, each focusing on a particular dispute resolution technique,” the report said. 

“This is designed to progressively filter out the less complex disputes and to resolve as many disputes as possible by cooperative means, reserving the effort of the most experienced and senior staff for the most complex and most contested disputes - at the end of the 'production line’.” 

This configuration, however, resulted in multiple hand-offs between FOS staff for many disputes, 'queuing’ of disputes between internal stages and delays in achieving a FOS view of the merits of disputes. 

The current structure was an essential step in FOS’s response to a post-GFC surge in complaint volumes, an influx of inexperienced staff and the need to 'unpick’ pre-merger differences in approach. 

“However, without substantive structural and process change, further incremental improvements are unlikely to be of the scale that stakeholders expect - nor do we think that incremental change will put FOS on a sustainable footing into the future,” CameronRalph Navigator said. 

“We argue that the next era for FOS requires a move to smaller, vertically integrated and more flexible teams - but not 'back’ to the vertical sector silos of the past.” 

The review made five key recommendations around timeliness and efficiency, improving user experience, leveraging of senior experience, engagement/responsiveness with financial services providers and revisiting financial difficulty approach. 

According to CameronRalph, short-term priority for FOS should be clearing dispute backlogs, but structural change should be on the cards for medium- to -long term. The firm provided a number of steps FOS could follow in order to successfully evolve to a new model. 

“FOS agrees that these high-level design principles provide a useful general guide for organisational design and development,” the board said in its response to the review. 

“FOS looks forward to working collaboratively with our financial services provider members, industry and consumer organisations as we redesign our processes so that we can continue to provide an accessible, fair and independent dispute resolution service to consumers and their financial services providers,” said FOS chair, Professor Michael Lavarch.