Almost a year ago, the Chartered Insurance Institute ruined the Personal Finance Society’s Christmas.
On 21 December 2022, the CII announced it was appointing a majority of directors to the PFS Board with immediate effect. The CII said that addressed “serious and significant governance failures”. The PFS said it was basically a coup.
The decision kicked off the dramatic series of events that has played out over past twelve months. The PFS’s president and financial planning chair both stepped down. CII chief executive Alan Vallance has called it a day, as have multiple other PFS directors.
The PFS has racked up a near-£1m bill on legal advice to deal with the fallout. Most recently, an open letter demanding the CII ringfence PFS funds or face court action has amassed more than 200 signatures.
But as we approach the momentous anniversary, there are still a swathe of unanswered questions at the very heart of the drama.
The plot thickens
A permanent CEO for the PFS was supposed to take charge “early in 2023” after a “smooth transition in leadership”. Yet current PFS CEO MacIntyre is still acting on a temporary basis after being appointed in August, with no further communication on succession.
The board has “benefitted from evolving substantially over the past few months” according to a spokesperson. “The board is reviewing the situation and will take a decision in due course.”
Many advisers said they would walk away from the PFS if the CII took it over.
“I used to get a kick out of my jumble of designatory letters and chartered designations and the like,” says adviser regulatory consultant Jonathan Purle. “But I gave up paying them a sub a few years back and don’t regret doing so.”
The PFS actually saw a slight uptick in membership numbers in 2022 according to its annual results. But no one knows the 2023 numbers yet. We asked the PFS for latest figures, but it declined to give them.
“The PFS states its membership numbers once a year, in its annual report, to avoid providing a running commentary,” the spokesperson said. “However, I am pleased to confirm that any suggestion that PFS membership has fallen to this point during 2023 is wide of the mark.”
Adviser intentions are also contradictory: in polls, the majority say they would leave the CII if it shut down the PFS. But the CII says its own consultations show most members want the CII and PFS to be part of the same group.
Even since their falling out, the pair have worked together to launch an ESG course for advisers and drive to get more women into the sector that have been well received.
Financial findings
A year on, we are also still little clearer as to the exact financial position of each body and quite how the backroom dealings played out. A huge number of questions remain about the state of the two organisations’ finances, which have not been solved by competing statements over the past year.
Financial planner Alasdair Walker, author of the open letter demanding protection against “further threats from the CII”, seems to think £10m of member money is still missing. The CII doesn’t agree.
Walker wants “an immediate transfer of all PFS funds to an account in the sole name and control of PFS”.
But in MacIntyre’s response, he said it was “simply not possible for the CII to use PFS funds without PFS board approval” already. “Nothing has changed,” the spokesperson said. “The PFS and CII group boards are content with the existing financial arrangements, including how PFS reserves are held and who has authority to access them. These arrangements mean that it is not possible for the CII to use PFS funds without PFS board approval.”
Keeping the faith
The near-£1m legal spend on mopping up the conflict also seems at odds with one of the reasons the CII said it needed to take control of the PFS board in the first place: “significant expenditure on external advisers substantially above agreed limits”.
“The PFS board acknowledges that the previous board felt it necessary to commit funds and it is not for the current board to comment on the previous board’s decisions associated with the challenges between the CII and the PFS,” the spokesperson said.
Financially, that spending and the wider loss of confidence could have an impact going forward. One advice market veteran says they are aware of sponsors pulling back from events until the disagreements between the organisations are resolved.
Under former CII boss Sandy Scot, who stepped down in 2016, the organisation’s finances were run soundly, another says. But its ability to manage its finances since have been called into question, particularly in the light of the CII-PFS conflicts. Those close to the CII continue to say it could have got a better deal when it sold its Aldermanbury offices six years ago, for example.
“I’m amazed that some regulator hasn’t stepped in and gone ‘hang on a minute’,” says another senior figure in the market.
A post-RDR boom in wealth qualifications helped prop up the CII’s coffers by expanding the offering of its PFS subsidiary, offsetting a trend towards direct sales in much of the general insurance market where demand for exams has waned.
But the PFS’s ability to create more exams is now limited in a crowded and well-served market – simply put, many people think they have already created a paper or conference for pretty much everything, and there just isn’t that much more to sell on the planning side.
“They’ve built an infrastructure that doesn’t need to exist anymore,” says the sector veteran. The CII and PFS have to prove that that isn’t the case. But don’t expect either to open the books completely any time soon.
