CII pledges to restore finances after de-registration row

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CII pledges to restore finances after de-registration row

Robin Melley, managing director of Shropshire-based advice firm Matrix Capital, and vice president of CII affiliate body the Insurance Institute for Shropshire and Mid-Wales, had accused the CII of failing to keep its finances in check. 

Having examined the body's annual accounts, he noted its net asset position had dropped over the years from £25.8m in 2016 to £16.8m in 2020.

While the wider CII group's assets have only fallen from £38.7m to £34.3m over the same timeframe, the institute's liabilities remain relatively high.

The accounts show liabilities in 2020 amounted to £27.6m, a chunk of which was owed to the Personal Finance Society, leading some to speculate that if the body were to be de-registered the debt burden on its parent would be eased. 

The PFS's accounts show the amount owed by parent undertakings was £16.3m. The money is made up of contributions from the PFS to the CII, such as member contributions, which cover the cost of running the adviser body. 

The CII denies the debt position has anything to do with its attempts to de-register the PFS. 

Responding to analysis of its financials by Melley, John Bissell, chief operating officer at the CII, said: “To be clear, the figure is an inter-company balance owed to subsidiary companies of the CII, of which the PFS is one such entity.

“We cannot comment upon what happens if the PFS de-registers as that would be an agreement between the boards of each entity.”

Melley believes if the CII loses a similar amount of money to that which was lost in 2020 - confirmed by the CII to be £8.3m in revenue - again in 2021, and continues to spend on its transformation projects, it could find itself in trouble. 

He said: "The CII’s financial position has been taken from one of a strong balance sheet with good cash reserves and an appreciating, unencumbered asset, to one that now appears to be at risk".

But Sian Fisher, chief executive officer of the CII, said work was already underway to strengthen the CII's balance sheet. 

However, she added the pandemic, which had impacted its events and exams business in particular, seeing events cancelled and exams moved to online, had disrupted its growth trajectory. 

She said: "A review of the CII by PWC in 2016 found, in their words, that we ‘were not fit for future purpose’ and needed to commit to being more ‘Relevant, Modern and Diverse’. We also needed to de-risk and make the CII’s financial foundations more sustainable and less costly.

“Following a period of sustained growth, the impact of the pandemic saw 2020 revenue fall to £36.9m, down £8.3m from 2019. Literally overnight, we lost any ability to host examinations and in-person events and during all the uncertainty, there was also a small decline in membership numbers.”

Fisher explained the CII’s attempt to cut costs saw operating expenditure fall to £40.9m, £2m lower than 2019. As a result, its operating result before tax was a deficit of £4m. 

“This is clearly not where we want to be but we are addressing this and to date in 2021 we are ahead of our revenue figure at this time in 2020, which is an encouraging sign of our ability to recover post pandemic,” she said. 

“The CII board supports our plan to fully restore our finances over the next three years, while finishing what we have started with our modernisation programme.

“It remains crucial that we complete the move to our updated technology systems. These will future proof our services, including new delivery platforms for exams, learning, events and membership, while also benefiting our colleagues. When the transition is complete, we will be a much more effective and cost-efficient organisation.”

Reviewing its finances

Today the CII published a strategy paper, setting out its plans for the future.

The CII acknowledged some PFS members were “unhappy” and pledged a "future of ongoing positive collaboration" which would be in the best interest of both bodies' members.

Sarah Lord, president of the Personal Finance Society, said she regretted that the PFS board had not been consulted prior to publishing the paper but pledged to be cooperative on input. 

However, the PFS board will over the next few weeks "continue to take steps to achieve clarity on the current financial position of the CII group, to ensure that the reserves accumulated from PFS members' subscriptions and other activities are used solely for the purposes set out in the PFS Articles of Association, that being to promote and facilitate the provision of financial advice," she warned.

She also said the board would explore "options for alternative legal structures" which would better protect and promote the interests of PFS members.

De-registration row

Earlier this year, advisers breathed a sigh of relief after the Personal Finance Society board voted against the CII's latest proposal to de-register the adviser body.

The CII had first proposed de-registering the PFS as a legal entity in 2016 and then again in 2019 with a view to making cost savings and reducing the tax bill.

Members and past presidents then came together to urge advisers to vote against specific CII resolutions at its AGM. 

sonia.rach@ft.com

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