IFAFeb 3 2023

Nexus flagged by Nucleus and 7IM over ad hoc fees

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Nexus flagged by Nucleus and 7IM over ad hoc fees
[Pexels/Ravi Kant]Nucleus and 7IM both said they are co-operating with an ongoing investigation

Nexus Independent Financial Advisers and Nexus Investment Managers, two business arms the Financial Conduct Authority placed restrictions on, were flagged by Nucleus and 7IM to the regulator over ad hoc fees.

FTAdviser understands ‘Platform N’ in the FCA’s supervisory notice is Nucleus, and ‘Platform S’ is 7IM. 

While both Nexus IFA and Nexus IM used 7IM, just the IFA arm used Nucleus, according to the notice.

FTAdviser understands Nexus also used Standard Life in a smaller capacity, but the FCA did not reference this platform in its notice.

Earlier this week, the FCA restricted both Nexus IFA and Nexus IM. It told both to immediately cease carrying on all regulated activities and to stop onboarding new customers.

It’s not appropriate for us to comment on an ongoing investigation, to which we are of course fully cooperating with.7IM

The regulator said it appeared around £2mn was withdrawn from client investment accounts held with either Nucleus or 7IM and transferred to Nexus’s IFA and IM business accounts between September 2021 and December 2022.

There is also evidence, the City watchdog said, which suggests the firms’ sole director transferred £1.4mn from one of the business accounts to their personal bank account.

On Companies House, chief executive Kerry Nelson is listed as the only active director at Nexus Independent Financial Advisers Limited.

Nelson was appointed to the Nucleus advisory board by the old management team, but she left mid-last year. It was an unpaid voluntary role, with no governance oversight.

'Risk of mis-use'

In the FCA’s notice, there are references to steps taken by both Nucleus and 7IM which flagged the ad hoc fees the director allegedly took.

To deduct ad hoc fees, the regulator said a client will typically be asked to provide signed instructions to confirm the fee, or will otherwise be sent a letter referring to the deduction of the ad hoc fee to the client’s correspondence address on file.

We can confirm that we’ve been in contact with the authorities regarding an isolated incident relating to the alleged financial impropriety.Nucleus

Under conduct principles, platforms are required to monitor the fees they facilitate between clients and their advisers.

The regulator told FTAdviser: "The FCA expects all platforms to monitor and mitigate any harm arising from the services they provide, including any adviser charging service.

"They should understand the risk of mis-use of those services, including potential fraud or over-charging, and have appropriate systems and controls to prevent consumer harm arising from them."

Investigations and 'high-level reviews'

On December 19, 2022, Nucleus sent the FCA a report summarising an investigation it had conducted following concerns about funds being transferred from one of their client’s accounts to Nexus IFA. 

The investigation concluded that £1,895,040 in ‘ad hoc’ adviser fees were transferred to Nexus IFA from accounts held by an individual client. 

The fees were deducted in round amounts, with a number taken across a succession of days within the same month. For example, in July 2022, fees of £180,000 had been deducted across three separate days. 

The regulator said Nucleus noted that the fees appeared not to be in line with typical transaction types and historic levels of fees and raised concerns as regards signed authorities it had obtained in connection with the approval of certain of these ‘ad hoc’ fees. 

A few days later, on December 22, 7IM also contacted the FCA. The regulator said the platform sent it a “high-level review” of all fees paid to the firms.

7IM flagged certain ad hoc fees, deducted between July 2022 and November 2022, which it had concerns about.

Specifically, 7IM identified that four clients had been subjected to deductions of ad hoc fees by the firms, of £111,000, £48,000, £9,700 and £7,500 for each client. 

A spokesperson for 7IM told FTAdviser: “As you can appreciate, it’s not appropriate for us to comment on an ongoing investigation, to which we are of course fully cooperating with as and when required, that is being conducted by the regulator.”

Nucleus also acknowledged its part in an ongoing investigation.

The platform told FTAdviser: “We can confirm that we’ve been in contact with the authorities regarding an isolated incident relating to the alleged financial impropriety that was the subject of the FCA’s recent supervisory notice concerning Nexus.

“We are supporting the investigation fully and as stated in the FCA’s notice, we raised concerns with regards to signed authorities we obtained in connection with the approval of certain ad hoc fees. 

“We understand that this will be a worrying time for Nexus customers. We want to reassure them that the assets we hold on their behalf remain with us for safeguarding and are not affected in any way by Nexus’ administration process.”

The platform said it has a dedicated point of contact for anyone concerned and that any customer can view their statements online or via the Nucleus Go app at any time.

A spokesperson from Abrdn told FTAdviser it also has processes in place to check for excessive adviser charging on all its platforms and takes appropriate action where needed.

Nexus Independent Financial Advisers and Nexus Investment Managers are in no way associated, affiliated or have any connection with Nexus Global IFA Network or Blacktower Financial Management Group.

ruby.hinchliffe@ft.com