Succession Wealth said it is “working closely” with the regulator in relation to unsuitable defined benefit transfer advice provided by an advice firm prior to its acquisition by the group.
In its annual results for the year ending December 31, 2021, Succession set aside £10.4mn as a provision to compensate clients who received unsuitable advice.
The results said: “A provision of £10.4mn is included for potential liabilities in respect of compensation owed to clients who received defined benefit pension transfer advice, which has subsequently been deemed no to be in the client’s best interests.
“The advice was given by a firm prior to its acquisition by the wider Succession Group who have been working closely with the FCA and independent third party advisers to undertake a review and to compensate clients where necessary.”
Succession said case reviews, all of which have now been completed, have been undertaken by specialist third party reviewers to determine whether the advice received was in the client’s best interests.
Where the conclusion is of unsuitable advice, compensation will be calculated independently by a firm of consulting actuaries.
The group said work on the calculation of compensation has commenced but is in “early stages”.
The amount of £10.4mn has been calculated based on modelling of potential compensation costs and including a range of scenarios determined with consulting actuaries and input from management.
The directors’ view, based on the actuarial estimate and known cases, is that the actual range of outcomes lies between £9mn and £11mn.
Within its results, the directors of the firm reworked the 2022-2023 forecast results using two additional scenarios - business plan excluding acquisitions and business plan flexed for market downturn.
Succession did this to stress test the business and its capital and the directors confirmed that the company has adequate resources to continues its business for the foreseeable future.
The market downturn model is based on the following assumptions: no market improvements in the FTSE from 31 Dec 2021, £0.5bn of assets lost in 2023 and non-achievement of various cost-saving initiatives.
FTAdviser understands the ‘going concern’ is an accounting exercise in respect of regulatory capital and other related finance matters.
The parameters that define the stress test are set for the firm.
The directors concluded that even using a market downturn scenario, the group would remain compliant with all FCA capital and external loan covenant requirements.
No change yet
In March, Aviva bought Succession Wealth in a deal worth up to £385mn, subject to regulatory approval.
At the time, Aviva said the deal “significantly enhances” its presence in the wealth market as more people seek advice for their retirement and savings options.
The company said through Succession Wealth, Aviva will be able to offer advice to approximately six million of its customers.
Of these, four million are workplace pension customers with £96bn assets under management, and approximately two million individual pensions and savings customers with £139bn AUM.
Aviva will focus on those customers who do not currently have an adviser.