A member director at the Personal Finance Society has hit back at the Chartered Insurance Institute about the "serious public allegations" made against the PFS board.
Before Christmas, the CII announced it was to appoint a majority of directors to the PFS board, following what it called failed mediation attempts and poor governance issues.
At the time, the CII also announced its decision to appoint three institute directors to the PFS board with immediate effect.
But in a right to reply seen by FTAdviser today (January 9), Vanessa Barnes, a member director of the Personal Finance Society, said there has been no evidence to support the CII's allegations of poor governance.
"You have published allegations that I, as a member director of the Personal Finance Society (PFS) have failed to act properly in accordance with the PFS Articles of Association and that I and other member directors are responsible for serious failures of board governance. However, you have not provided any evidence to support your allegations, which I personally refute," she wrote.
“As you have chosen to make your accusations publicly and without prior consultation or engagement, I feel I have no option but to respond accordingly to your false allegations and I aim to provide fact based substantiation of my replies to correct your factual inaccuracies.”
PFS member directors and advisers of the board had already issued a statement on January 5, saying claims of poor governance had not been supported by evidence.
In response, the CII reiterated that it was forced to take action to appoint directors to the PFS board after “significant governance failings”, which had left it with “no choice”.
Helen Phillips, group chair at the CII, said on January 5 the PFS board's governance failures were not, as claimed, “baseless or without foundation”, and suggestions that the CII group board had appointed further institute directors for any other reason was “deeply misleading”.
However, Barnes said today that this was “not a true and accurate statement”.
She said: “The CII have had three failed attempts to gain control of the PFS by winding it up in 2017, 2019 and in 2021. It is clear that you see yourself as an executive chair.
“On July 14, 2022, you wrote to the PFS president and said 'that in order to protect our joint and respective members’ best interests the CII will have no choice but to appoint Institute directors to form the majority of the PFS board if mediation without preconditions does not proceed or successfully conclude within a short timeframe.”
Barnes said the letter acknowledged that the PFS was run effectively and efficiently and there was no mention of any failures of governance.
Responding to Phillips’ claims that the CII had responded to the PFS board’s demands “diligently, professionally and with immense goodwill”, Barnes said this was “factually not true”.
“I am not aware of any PFS board demands, only CII demands,” she wrote.
Bank loan concern
Part of the disagreement stems from a bank loan, for which Barnes said the CII had placed “unreasonable pressure” on the PFS board to act as a guarantor.
Barnes said the PFS board had engaged an external advice team to perform the required due diligence to facilitate the loan, which had raised concerns around the CII’s forecasts and said there was a “significant risk” the CII would not be able to repay the loan.
“As much as I and my board colleagues were willing to provide financial assistance to the CII to avoid disruption for our members, my duties and obligations and due governance to the PFS meant that I could not agree to a loan of the members’ reserves,” Barnes said.
Barnes also refuted allegations that the PFS board was seeking to exclude the CII group audit and risk committee from oversight of audit and financial statements. Instead, she said, the PFS should consider forming its own audit & risk committee.
She said she had previously raised concerns over the CII’s cash position in June 2021, over concerns it could fall below the level of the PFS reserves.
“I was told that there was no requirement for the PFS board to be informed in that event and that the CII did not consider this of material risk to the PFS.”
She added the PFS board did not have sight of the rest of the PFS reserves, and she was concerned that the reserves were being used to prevent further calls on the CII’s own long term investments.
More allegations
Other allegations refuted by Barnes included the CII’s claim that it would continue to provide and maintain all PFS member services, as well as the PFS board’s “lack of collective decision making”, the exclusion of institute-appointed directors from PFS board meetings and the “inappropriate” establishment of a sub-committee.
In response, Barnes highlighted issues she had experienced personally with SPS applications and renewals, and said as part of her director’s duties had questioned the CII’s “deteriorating service standards and delivery”.
“I have experienced a range of excuses through repeated enquiries without resolution.
“I am aware from a whistleblower employee at the CII that complaints from PFS members have been suppressed and not brought to the attention of the PFS board or CEO.”
She also criticised the CII’s claim that she had failed to act in line with the articles of association approved by PFS members, and has called for the PFS board minutes and supporting documentation for the past 18 months to be published in full.
Barnes said despite repeated requests, the CII has not provided any evidence that failures of governance were raised with the PFS board, and the minutes would show this.
She said the letter from the CII to the PFS president last July saying the former would appoint a majority to the latter’s board unless the issues were resolved was a “veiled threat” and “deliberate intimidation and bullying” of the PFS board.
“There is clear evidence through publications, documentation and statements issued by the CII that there is a lack of understanding from the CII regarding the evolution of financial planning," Barnes said.
“With the appointment of a majority to the PFS board, the Chartered Insurance Institute will control the largest personal finance membership organisation in the UK.
“In my opinion, this change of leadership will not help my profession to meet the standards set by the regulator and will ultimately have a negative impact on the introduction of the consumer duty.”
A spokesperson for the CII said: “Governance failings were repeatedly raised with the PFS that were neither acknowledged nor acted upon, leaving the CII group board with no choice but to address these failings.
"Sadly, any suggestion that the CII group board has appointed further institute directors for any other reason is deeply misleading.”
sally.hickey@ft.com, sonia.rach@ft.com
