CompaniesApr 27 2016

Tavistock chases ex-ARs for 6-figure redress costs

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Tavistock chases ex-ARs for 6-figure redress costs

Tavistock Financial is pursuing former appointed representatives (ARs) of Financial Limited, the failed adviser network it bought last year.

Clients are receiving compensation from Financial Ltd, now in liquidation, paid by its professional indemnity insurers, less the excesses current owner Tavistock is now demanding ex-Financial Ltd advisers meet.

PI excesses – the amount a firm must pay towards claims against it before a policy is triggered to cover the rest – usually range from around £5,000 to £10,000 per claim, according to Tavistock’s website.

But a number of ex-appointed representatives told Financial Adviser they had received wildly varied demands for payment without explanation – ranging from a few hundred pounds to tens of thousands of pounds – from Financial Ltd, then Tavistock once it took over the network last year.

Robert Gray, director of Gray & Associates, who was an AR of Financial Ltd between 2004 and 2008, has had 33 invoices from Financial Ltd and Tavistock demanding payments between £700 and £27,000.

A spokeswoman for Tavistock confirmed former Financial Ltd advisers had been asked to pay the excess amount not covered by insurance, “as specified in their contracts”.

The compensation arose out of ongoing past business reviews, ordered by the regulator into pension switching advice given by Financial Ltd’s advisers as far back as 2006.

The advice now deemed inappropriate was passed by Financial Ltd’s compliance process, the advisers claimed.

Brian Raven, chief executive of Tavistock, which bought Financial Ltd’s parent Standard Financial Group in February 2015, told Financial Adviser last week the probe into past advice is on the verge of being completed.

But as the network had as many as 300 appointed representatives in 2014, just a handful of claims per adviser could cause PI excess costs running into millions.

Mr Raven said Tavistock had brokered a deal with the FCA over the rescue of Financial Ltd. Mr Raven said he agreed to buy the failing advice network as long as Tavistock shareholders were not made to take on Financial Ltd’s liabilities.

The ex-Financial Ltd advisers claimed they are being chased unfairly as a result.

Mr Gray said the invoices offered “no explanation” about how the amounts being demanded were arrived at.

According to the Gray & Associates director, Financial Ltd began writing to his clients in 2010 – without informing him beforehand – to list “potential areas for concern” over the advice given, before asking if clients wanted Financial Ltd to carry out further investigations.

Mr Gray complained the language in the letters “solicited the clients to claim” by making it seem the adviser had given unsuitable advice without any suggestion the network’s monitoring could be at fault.

He said the total figure Tavistock is trying to clawback from him on behalf of Financial Ltd is £180,000. A spokesperson for Tavistock declined to comment on Mr Gray’s claims.

“I thought it was ridiculous no one had contacted me to find out my side of the story.” Michael Ashcroft

Michael Ashcroft, IFA at Northampton-based Aspire Financial Management, said the network had asked him to pay £900.

He also said he was given no explanation for the figure and branded it “ridiculous” Tavistock had not contacted him to alert him to the claim or discuss its merits.

Another adviser, who did not want to be named, received three invoices “out of the blue” from Tavistock, and subsequently challenged the network on the calculations.

An email response from Tavistock to the adviser, seen by Financial Adviser, reads: “We appreciate this will be frustrating and advisers may feel they’ve not been able to ‘have their say’, but the review is directed to be an objective assessment of the documentary evidence available.”

A spokeswoman for Tavistock said it was “surprising” advisers claim not to have been made aware of the process, adding: “These matters relate to Financial Limited and advice given years before Tavistock acquired the network.”

According to a source close to Financial Ltd, the early contract made it clear the network would pay all the compensation fees, but the contracts were then revised and different clauses were added in, wtih some advisers disputing they agreed to the changes.

Tavistock declined an invitation to comment on this claim.

katherine.denham@ft.com