Rowanmoor was once a subsidiary of the Embark Group, but upon the completion of the adviser platform's £390mn sale to Lloyds Banking Group, it was split off from Rowanmoor Personal Pensions Limited (RRPL) - the £1.4bn part of the business in administration and facing claims.
RPPL was sold to Rowanmoor Group Limited, an independent entity set up as part of the sale.
In financial results published on Companies House this week, Embark said: "Embark Group Limited no longer has any obligation for the company sold to Rowanmoor Group Limited, including RPPL and the associated customer redress.
“As a result, the provision of £343.8mn included in these reported results is no longer required from the date of disposal. Elements of the financial statements have been reclassified as held for sale."
In 2020, Embark had set aside £323.8mn for customer redress, and in 2021 it set aside a further £20.8mn. This cash was deducted from the business’ profits.
Last year, it recorded a loss before tax of £33mn, a significant reduction on its £341.9mn loss the prior year which reflected redress costs.
In its provision and contingent liabilities, Embark said its closing customer redress provision for the year ended December 31, 2021 was £1.26mn.
In September, the Financial Conduct Authority told FTAdviser that before it approved Lloyds’ purchase of the business, Embark’s board undertook an assessment of potential redress liabilities.
The regulator said a provision “close to the upper end” of the calculated range of redress was made into Rowanmoor.
“This provision represented the best estimate of the cost of settling these potential liabilities at the time,” the regulator said. “The provision made will be used towards potential liabilities.”
The issues leading to RPPL’s insolvency pre-dated Rowanmoor’s acquisition by Embark in 2016. Back in January, Rowanmoor was found to have failed in its due diligence by the Financial Ombudsman Service.
The upheld Fos complaint found Rowanmoor had failed to verify the integrity of introducer firm CIB Life and Pensions Limited, which it worked with on hundreds of high-risk Sipp investments.
Failure to do its due diligence led to clients taking the introducer firm’s advice and losing their occupational pension savings on an unregulated Cape Verde-based property deal called The Resort Group.
In Embark’s calculations for redress in its results, it said it had stuck to the upper end of the redress range it estimated.
This was due to the fact it was aware time bars on claims would likely be waived and that the compensation per client would likely exceed the Fos cap of £150,000 to £160,000.
Elsewhere in Embark’s results for the year ended December 2021, the platform said it also recognised a further provision for customer redress within Embark Services Limited (ESL).
This totalled £750,000, and related to 12 cases identified where it said “a negative outcome is likely”.
The platform said its aim is to settle directly with the customers in ESL.
Surge in robo B2B revenue
Embark’s business-to-business (B2B) arm, which supplies its platform technology to third parties, has seen revenues surge.
In its results, the platform said its BTB robo wrap services jumped from £1mn in revenue to over £63mn. Across the group, revenues increased to £92.2mn in 2021, from £61mn the previous year.
The platform’s assets under administration hit £42.9bn, up from £35.9bn in 2020.
The platform added 27,791 new pensions, Isa and general investment accounts over the year and acquired 16,816 accounts, boosting overall account numbers by 11.43 per cent to 432,871.
Meanwhile, administrative expenses jumped from £59mn to £87.8mn.
ruby.hinchliffe@ft.com
