Canada Life pays out £21K redress over Arch Cru switch
More on Companies & People
- Ros speaks out and DWP tinkers: week in news
- New lender launches into mortgage market
- Momentum Pensions launches Sipp for smaller pots
In focus: Arch Cru
Canada Life paid out more than £21,000 to compensate an IFA’s client after admitting that it failed to notify the client or the adviser that several underlying investment portfolios had been switched by the previous fund manager to the Arch Cru funds.
In November 2007, advisory companies who had clients invested in Canlife Insinger de Beaufort funds received a letter from Canada Life, seen by FTAdviser, stating that changes were being made and that Insinger was transferring the portfolio to Arch Cru.
The letter recommended that clients seek “professional advice”.
FTAdviser reported last week on concern among some IFAs that the switch of funds may lead to them being hit with further compensation demands.
One IFA, Newcastle-based Lowes Financial Management, told FTAdviser that despite advising against the switch and sending a warning letter to clients, it could be forced to invite potential claims to be referred to the Financial Ombudsman Service.
Canada Life said in a statement at the time that it “does not give advice on products or fund choice”, indicating it would not take responsibility for the transfers and any losses subsequently accrued.
However, an IFA, who asked not to be named, received a letter in August 2010 from Canada Life, which FTAdviser has seen, in which the firm admits that it failed to notify either the client or the adviser of the switch and that it would therefore pay redress into the policy to cover losses.
The letter says that the client “did not have an effective opportunity” to switch away from Arch Cru funds after their holding was switched into the Canlife CF Arch Cru balanced fund on 13 December 2007, when the renewal process was completed on their AGA policy.
At the time the value of the client’s fund holding that was invested in the Canlife CF Arch Cru Balanced fund was £27,071.47.
Canada Life calculated the average performance of all the other funds offered in the Balanced Managed sector from December 2007 to 30 July 2010 had fallen 6.89 per cent. Therefore Canada Life made a cash injection of £21,809.39 into the policy.
The IFA warned, though, that the case does not believe the case sets a precedent as it stems from a related complaint after it was discovered that the client had erroneously ticked a form to renew their five-year policy despite stating a desire to purchase an annuity.
He said: “At that point we still weren’t aware of the Arch Cru issue. Then we received a letter about the annuity and we saw it was a different fund manager. That was the first point that we were aware of the manager swap.
“What we saw implied that it was the same risk profile and the only difference was that Canada Life had taken on a new manager.
“We went back to Canada Life with the second complaint as the client had funds that he had not signed up for. They agreed to pay him compensation and put the fund back up to the value it would have been prior to Arch.”
A spokesperson for Canada Life said the firm could not comment without being provided with details of the policy to allow for it to review the case.