An advice firm has failed after receiving 35 Financial Ombudsman Service (FOS) complaints in relation to pension transfer advice.
A.W. Dallas Financial Services started liquidation proceedings after facing mounting complaints from former members of the British Steel Pension Scheme (BSPS), which threatened to exceed "hundreds of thousands of pounds", according to the accountants.
In a letter sent to creditors by Menzies yesterday (August 23), it said the directors of A.W. Dallas Financial Services, trading as Portfolio Pensions Consultancy, have decided to commence liquidation proceedings due to the firm's financial position.
In its financial statement for the year ended July 31, 2020, published on Companies House on July 9, the firm admitted that its future was dependent on the “outcome of the complaints and the extent of any resulting liability, together with the company’s ability to obtain a renewal of its professional indemnity insurance”.
It also stated: “In line with some other financial advisory firms in South Wales, the company has a potential exposure in respect of historic defined benefit pension scheme transfer advice.
“At the date of approval of the financial statements none of the complaints had been upheld. The directors deny any liability by the company and continue to defend the company’s position.”
Menzies said the firm had been the subject of complaints in respect of advice provided to clients between August 2017 and February 2018, and it is thought the liabilities could exceed hundreds of thousands of pounds if upheld.
It said the mounting complaints were making up "nearly a quarter of the client book".
According to Menzies, having stopped trading on August 2, A.W. Dallas will be wound down and placed into liquidation in the coming days.
Initially, the firm’s directors and Menzies had hoped the business and assets would be sold through a pre-packaged sale and administration of the company to an associated business.
However, the Financial Conduct Authority opposed the sale because the directors and senior managers of both firms were the same.
According to Menzies, the FCA did not believe it appropriate for the directors to continue to benefit from customers that were potentially mis-advised by A.W. Dallas, and whose redress liabilities would likely be passed to the FSCS.
John Cullen, partner at Menzies, said: “We had hoped to sell the business and assets of the company for a certain sum, and in so doing allow the business to continue operating.
“This has not been possible however, and despite owning a client list of more than 200 client accounts, the directors have been left with no other option but to instruct Menzies LLP to assist with placing the company into liquidation with immediate effect. We hope to complete a sale of the customer list to a third party shortly, but regrettably the value generated will not be significant.”
Explaining the background to the liquidation, Cullen added: “The directors of A.W. Dallas Financial Services Limited came to us for insolvency advice because of the mounting number of claims the firm was facing, nearly a quarter of the client book.
"The excess payable on its professional indemnity insurance liability in respect of these claims, which represents about £30,000 per claim, could not be met”.
“Any individuals seeking redress from A.W. Dallas Financial Services Limited should refer their claims to the Financial Services Compensation Scheme, which is able to guarantee payment up to a value of £85,000.”
The BSPS case
Three years ago British Steel Pension Scheme members were asked to make decisions about their pensions as part of a restructure of the scheme.
About 8,000 members transferred out of the scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
The debacle created a mountain of liabilities, which lawyers believe could end up costing the industry up to £300m.
Meanwhile the Financial Conduct Authority will travel to Swansea next month to meet steelworkers who could be due compensation.
The City watchdog is being joined by the Fos, the Financial Services Compensation Scheme and MoneyHelper to hold one-to-one sessions for those who transferred out of BSPS.
The sessions will take place on September 28-30 at the Mercure Hotel in Swansea.
amy.austin@ft.com
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