PFS hit with nearly £1mn legal and advice bill over board saga

In its full-year results ending December 31 2022, published today (October 25) on Companies House, the PFS said operating expenses over the year were £3.22mn higher than in 2021 (£4.77mn).

The PFS said the main reason for the increase related to event costs to support the in-person events held in 2022, such as the Festival of Financial Planning.

However, there was also an increase in consulting costs of £1.35mn. The accounts said the PFS had spent £0.85mn on expert legal and financial advice, "required by the unique circumstances triggered by the CII's desire to begin mediation from July 2022".

It has been the top priority of the PFS board to reach a settled position.-PFS report and accounts

The PFS board brought in external consultants to support the company’s directors with legal, financial and communication efforts during their discussions with the CII on a future operating model of the company within the group.

The firm said much of the rest of this spend was to enable the PFS to have its own communications function during a “sensitive and challenging time for the organisation”.

“The complex nature of these discussions required expertise to enable the board to navigate new territory,” it wrote. 

“The decision to engage external consultants ensured that the board received the best possible advice to support effective discharge of their director responsibilities throughout this process.”

The PFS also reported a central overhead recharge in 2022 of £3.83mn which was broadly in line with the previous year (£3.85mn). 

The accounts also revealed that operating profit for 2022 was £1.77mn, a reduction of £1.60mn from 2021 which was driven by the increased costs.

The firm said taxation was £0.20mn compared to £1.67mn in 2021, which is “prudent” as the company continues its discussion with the tax authority regarding the status of historic tax assessments raised in late 2021.

Net reserves stood at £17.25mn, up from £15.71mn, which represents approximately 25 months of operating expenditure and "provides sufficient protection against future risks and uncertainties which may be faced by the PFS".

The PFS said its governance and operating model was a principal focus for the board during 2022 as it entered mediation with the CII in September 2022.

“That process was interrupted in December 2022, however, this end goal will remain for 2023,” it said.

“It has been the top priority of the PFS board to reach a settled position after a considerable period of turbulence. 

"We recognise that this has been a source of concern among both our individual and corporate members.”

Throughout 2022, the PFS board engaged external legal, financial and communication advisers to support it in reaching this position. 

The advisers were initially engaged in late 2021 to advise on directors’ duties and matters relating to challenges between the CII and the PFS.

“It was necessary to engage professional advisers to ensure that significant decisions were informed by impartial, expert, professional advice,” it said.

Ongoing concerns

The PFS said the prolonged uncertainty between the two bodies created some concerns among corporate and individual members.

However, there was still an increase in membership numbers.

The PFS reported that it ended the year with 40,032 members - an increase of 658 compared to 2021.

Of these members, it had 3,827 fellows, 4,694 associates, 21,684 at diploma level, 3,194 at certificate level and 6,633 at student level and affiliates.

“There was a slight reduction in membership revenue as membership volume fell slightly in the first half of 2022 but picked up in the second half of the year,” the PFS said.

“This was more than offset by the increase in sponsorship revenue as the company welcomed its members back to in-person events and to its flagship event - The Festival of Financial planning, held in November 2022.”

Revenue was also up at £9.76mn from £8.14mn the previous year.

The PFS said its board and CEO have worked with the CII to tackle concerns about online training and examination processes which continued to be disrupted in 2022.

This comes as the CII has been plagued with a number of technical issues over the past couple of years. 

In November 2021, the CII faced exam glitches as candidates were unable to view their results and certificates online.

During the pandemic, the CII also apologised to candidates for “unacceptable instances” including problems with accessing remote invigilation sessions and technical issues during sittings.

Candidates had experienced a delayed start to a remote invigilated exam in July 2020, followed by some candidates experiencing technical issues with a remote multiple choice exam in August.

Technical issues continued in test centres in October 2020, with candidates claiming their computer system froze or shut down hours into the exam.

However, these issues continued into 2021. In March, the CII was forced to issue its exam results a day early after it suffered a technical issue, causing confusion among candidates.In April, it was reported that advisers were unable to take exams due to system failure.

Between January 2021 to March 2022, FTAdviser understands the CII delivered 62,000 examinations and received 1,906 complaints, equating to around 3 per cent of candidates.

In January this year, the CII experienced fresh exam difficulties after dealing with a “technical problem” on its R06 exam.

The PFS noted in its report that it will work together with the CII to materially improve these issues.

It added: “The PFS board will be listening carefully to its members and remaining focused on ensuring the strength and success of the PFS continues well into the future.

“With effort and focus on service provision, we are confident that financial planning and advisory professionals will continue to choose our training and accreditation and regard the PFS as the premium organisation for our sector.”

sonia.rach@ft.com

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