The Chartered Insurance Institute's (CII) decision to appoint a majority of directors to the Personal Finance Society board has been met with widespread shock and contempt, from both past presidents and advisers alike.
Responding to the announcement, PFS president Caroline Stuart said neither the board or the PFS membership had been given prior notice of the decision and as such it came as “a huge shock”.
FTAdviser understands the PFS will hold an emergency board meeting to respond to the development.
Under its articles of association, the PFS has thirty days from the action declared by the CII to consult with its members.
“Having not informed our board of its intentions, the CII has acted unilaterally and without PFS leadership or member consent. We will take the right steps available to us to consult PFS members as to their views on if such a move by the CII is in PFS members’ and the PFS’s best interests,” Stuart said.
In a tweet, Elliot Guthrie, financial planner at Create and Prosper, wrote: "Disappointing to see @CIIGroup bully their way onto the PFS board - also worrying that the CII now have control over the PFS finances given their track record with poor management and 'borrowing' from the PFS."
Meanwhile, PFS past president, Garry Hale described the timing of the announcement just before Christmas as a “blatant attempt to avoid scrutiny”.
Hale said he was “shocked, stunned and angered” that the CII chose to take “the harmful and cynical decision to announce its intention to ‘flood’ the PFS board with CII nominee directors”.
“The timing of this on the eve of Christmas celebrations is a blatant attempt to avoid scrutiny, avoid CII/PFS member backlash, avoid journalists’ questions and prevent regulators and politicians from actively understanding or mediating the decision,” Hale said.
He believes the decision was made “in the full knowledge that the majority of the members, sector journalists and regulators will be off work and with their families, in many cases for the first time in three years.”
Hale urged all PFS members to “speak out and raise any concerns they have about this potentially damaging move”.
The PFS is a subsidiary of the CII group, and the PFS’ articles of association give the CII group board the right to equalise and/or appoint a majority of directors to the PFS board.
The PFS board is currently made up of five PFS member directors and two institute directors.
However, the CII is appointing a further three institute directors; Sarah Howe, Neil Watts and Azlina Bulmer.
FTAdviser understands the PFS president and chief executive were notified of the CII decision less than an hour before a member email was sent yesterday morning and the press conference was held by the CII.
It is further understood that the PFS were not told of, or given the opportunity to participate in the media briefing.
Sarah Lord, president of the PFS from 2020 to 2022 described the announcement as “deeply cynical” and “premeditated”.
“I have until very recently been in conversations with the CII leadership and we have engaged in mediation at their request. The conversations were still underway. It is extraordinary that they have been so disingenuous,” Lord said.
She added: “Acting in this way [today], and in such an aggressive way, is likely designed to diminish the existing PFS Boards powers and undermine its forward-looking strategy. I will do all I can over the coming weeks to ensure the Personal Finance Society, its members and the professions interests are protected.”
Member response
A website has been created by PFS members encouraging other members to act against what it describes as a “coup”.
The site, OurPFS.co.uk, urged members to “make your voice heard” and said “we will not be treated as a cash cow”.
Another adviser, Alan Smith, chief executive of Capital Asset Management, said: "If you're a member of the PFS, I urge you to join this mailing list to coordinate efforts and ensure that we won't be bullied by the CII - who seem hell-bent on accessing your membership funds."
Reacting to the news on twitter, financial planner, Dennis Hall wrote: "Shocked by what I am reading from the @CIIGroup about their plans to have majority representation on the @pfsconf board. I will reflect on this but my inclination is to move all @YellowtailFP membership from CII/PFS to @CISI even if it means dropping my Chartered qualification."
Speaking at a press briefing yesterday (December 21), CII CEO Alan Vallance, who was appointed to the role in April, said: “This is not an outcome that the institute's board wanted or pursued and we definitely would have preferred to be here today talking about the PFS operating the same way as it has for nearly 20 years now since 2004.
“The institute team has worked extremely hard for many months, responding very diligently and professionally to what have been a great many number of requests from the PFS board.
“We could have taken the action we're taking today 18 months ago but we chose not to do so. Instead, it was the Institute who proposed mediation to the PFS, the Institute who invested significant time and effort to convince the PFS to come to the mediation table and it was the PFS not the Institute who declared that the mediation had failed.”
Vallance said from the institute's perspective, it is “deeply disappointing” that independent mediation has failed.
He said the CII were “very active person to participants” in that mediation but unfortunately, during that process, it saw “some significant governance failures within the PFS board” that really undermined its ability and desire to achieve that agreement.
“The issues we've identified include a lack of collective decision making by the PFS board, failures to include all PFS board directors in discussions and decision making, the inappropriate establishment of committees that are directing work without proper authority from the seat of PFS board or input from the CII were relevant, and in particular at the exclusion of Institute appointed directors from the PIF best board meetings and decision-making processes,” he said.
“As a result, the institute's group board has been left with no alternative but to act decisively to address these governance failures and to create a solid governance foundation for the future. It's the right thing to do. Today is the right time to do it.”
When asked specifically about the governance issues, Vallance said he was aware of one committee that was established without valid authority from the board and discussions about potentially another committee being set up without reference back to the group, which was a requirement under the terms of reference of the PFS board.
“They're a very clear example of where that's happened and it's very clear that essentially what we're talking about here is proper governance so the board of the PFS operates under the company's articles of association, but also have board terms of reference documents,” he said.
“So what we're very much about is making sure that they operate to those terms that are required to do.”
Vallance said the way in which it is doing this is by appointing three experienced directors to the board, who collectively bring a huge amount of board level expertise and exceptional experience.
What happens now
Vallance said moving forward, it means for the PFS board that there are new directors appointed who've got “fantastic experience” in governance skills, financial services and membership engagement.
“[These are] all the things that we want to see at the PFS board evidence but the day to day operation of the organisation won't change in fact, it's the CII who provide all of the services, the products, the exams to PFS members that have done so for many years so none of that will change.
“What will change is that there is a newly composed PFS board with a richer skill set and much improved governance experience that we want to work with in the future to continue to make sure that the PFS provides all of the services that it needs to to members.”
When asked about whether the finances had a part to play in this decision, Vallance denied this was the case.
He said the financial situation “had nothing to do with this decision” and that it was very much “purely about governance matters”.
Vallance said a breakaway from within the group was not something that the CII has ever discussed.
“We are a group, a royal charter body group with two professional membership bodies within it, which is fantastic,” he said.
“We are a group of companies. Each company has resources within it; some of its cash people are for other things. So each board within the company is responsible for protecting the assets within that company.”
Within the PFS, cash that was within the PFS company, remains within the company and that's all consolidated as part of the group results under the accounting arrangements and none of that will change, he explained.
“My expectation is that any cash within the PFS company, it's the responsibility of the PFS board to make sure that's managed properly and nothing will change in that regard.”
Although the press conference was not there to discuss the operations of the group, Vallance said: “We're very much focused on governance, but I will say that the organisation has had challenges with its IT and other things.
“I'm determined that we resolve those rules for the next 12 months.”
jane.matthews@ft.com & sonia.rach@ft.com
