Sesame advisers caught by its past business review into pension transfers may be required to pay thousands of pounds relating to cases where ‘unsuitable’ recommendations were assessed to have been given, despite assurances that they would not be pursued.
A spokesperson for Sesame previously told FTAdviser the network would not be pursuing advisers for either the costs of conducting the pension transfer review or for redress arising out of it, claiming that its professional indemnity insurance will cover all costs arising from the process.
The spokesperson said at the time: “That is a benefit of being in a network.”
However, a letter from Sesame to affected advisers, seen by FTAdviser, revealed advisers will be covered by their individually agreed PI cover and that the network will seek to recover excesses on the policy.
PI excesses vary depending on cover agreed and firm revenues, and tend to apply on a case-by-case basis, meaning firms could be liable for tens of thousands in redress where there have mutliple cases subject to the review.
In a similar case involving national advice firm Ashley Law, which is asking advisers to meet the costs of assessment and compensation, one adviser told FTAdviser that he would be liable for a bill of around £20,000.
The adviser has 10 cases in the review, four of which will be compensated. His PI cover adviser has a £9,000 excess limit per case.
A Sesame adviser, who wished to remain anonymous, told FTAdviser that his PI excess is £4,000 per case, meaning if he has multiple pension transfer cases that the review finds unsuitable, he may have to pay thousands of pounds.
In the letter, Sesame acknowlegdes the potential costs and says it will seek to ensure repayment terms do not undermine a firm’s ability to remain in business.
The letter, sent in June, said: “The review will shortly move to the ‘redress’ phase and we will begin to make payments to individual customers.
“As this activity progresses, we are conscious that members affected by the review are becoming increasingly concerned about their capacity to meet their financial liabilities to us, where multiple PI excesses are likely to fall due from them.
“We would not wish to dismiss these concerns, as members have clearly understood that our duty to manage our business in the interests of our shareholders and to maintain the strength of the network for all ARs means that we have a responsibility to recover sums due to us wherever possible.
“As the scale of any liabilities to us becomes clear for each member, before we apply any debits against an individual firm’s account, we intend to engage with that member to discuss what practical arrangements may be needed to facilitate our recovery of any sums due in a way that, where we believe possible, also allows them to continue operating as an active member of Sesame Network.”
A more recent letter sent to Sesame advisers, dated August, revealed that the first phase of the review, which had been undertaken by Deloitte, has almost concluded, and that phase two, to be completed by a separate independent firm The Consulting Consortium, is set to begin.
The letter continued that advisers may be contacted by TCC in the coming weeks and this may involve requesting further information regarding the circumstances of any “sale”, as well as writing to customers to ascertain whether they want their case to be included in the review.
The same Sesame adviser told FTAdviser: “The letter that was sent out two weeks ago mentioned a phase two and that is the first time that I have heard of it. Everyone knew about phase one and everyone thought that was it.
“Sesame haven’t said a word about it but the letter said we are in phase two.”
The adviser said he was told by TCC that phase one was a “pilot” and that “phase two was a wider review which was looking at about 5,000 cases”. He said that a widespread view held by Sesame advisers is that 5,000 cases “would be a full review of all cases”.
A Sesame spokesperson said: “It is a matter of public record that Sesame has engaged specialist third parties to conduct a past business review on some aspects of pensions transfers as part of a settlement agreement made with the Financial Conduct Authority in 2013.
“Sesame has however pledged that the business will absorb the considerable costs of conducting this exercise and we have no plans to recoup these costs from members.
“One of the benefits of being part of a network is our ability to secure quality, affordable professional indemnity insurance to protect our members against compensation claims.
“As with any PI insurance policy, and in line with our normal complaints procedures, advisers are however liable for policy excesses. We have been keeping affected members updated on the process and are committed to working closely with them to address any concerns they may have.”
