Keith Richards: Independent review may be 'only way' forward for CII/PFS

Speaking to FTAdviser, Richards who is the current chair of the Financial Vulnerability Taskforce, said the attempts by the CII to publicly position itself as “stepping in to rescue the poorly managed PFS" was a "significant mistake”.

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.

Richards noted that the approach has not gone down well with anyone, especially members, and described the situation as “a very sad state of affairs”.

He said: “The whole public debacle created by the CII was so inappropriate and unnecessary.

“The ongoing publicity and social media coverage of the CII’s attempts to seize majority control of the PFS continues to raise questions surrounding the credibility of the CII’s capabilities to effectively manage its own operations and financial affairs."

The CII’s reputation, integrity and honesty is at stakeKeith Richards

Richards highlighted the statement given by Vanessa Barnes, a member director of the PFS, and the resignation statement made by former PFS president, Caroline Stuart, in which both refute the allegations of poor governance. 

In Richard’s view, the CII now needs to properly inform the PFS what poor governance it is accusing it of.

“The CII is morally duty bound to supply the information to the accused PFS member directors, who are stating that they were not consulted or provided with any warning," he said.

“They have said the first they knew of the CII’s criticisms and intention to take control, was at the same time everyone else read about it in the CII official press statement. If true, this is both shocking and unacceptable."

He added: “I would hope by now that the PFS board have been afforded the professional courtesy and at the very least supplied with the evidence.

"The CII’s reputation, integrity and honesty is at stake and it is essential they act quickly and appropriately to mitigate further negative impact.”

Bemusement

Richards said he has been inundated with messages from advisers and other key individuals from across the wider industry in relation to the debacle.

“Most are bemused, some angry but all simply looking for answers and possible insight to explain why the CII seems to persist in bringing the profession into disrepute and driving deeper down a route of potential self-destruction,” he said.

“The CII’s credibility was further impacted this week by the ongoing and long running technical issues impacting exam sittings, which could not have come at a worst time for the Institute,” Richards added.

Based on the conversations Richards has had with members he said it is clear they want to see transparency and accountable leadership, but the responses from the CII so far have instead exacerbated matters and further eroded confidence and trust in the leadership.

He said: “All PFS members I have encountered over the past few weeks completely resent the CII attempts to de-register the PFS, along with the interference of the previously successful PFS strategy and structure, which had seen positive year on year growth post RDR. 

“Most people were of course previously unaware of attempts to wind-up the PFS in 2017 and 2019, the first attempt being in the same year that the PFS introduced its first ever ‘Festival of Financial Planning’ which attracted a record 3,300 attendees. 

“2017 was also the year which saw other key initiatives, including the launch of its second pro-bono consumer facing initiative, Forces MoneyPlan, for Veterans of our Armed Forces."

He noted that the final failed attempt came in June 2021 when the CII asserted that it had been left with “no alternative but to act decisively”.

At the time, the CII justified its attempt to take control of the PFS board by citing governance concerns.

It said “this is not an outcome the CII group board wanted or pursued” but Richards has said this highlighted the “contradiction of evidence based actions and threw the fuel of disbelief on the proverbial fire”.

“One way or another, everyone can see that control has been pursued for the past six years and such contradictory claims are making things worse.”

So what is next?

In Richards’ view, a number of solutions exist to remedy the situation but only if there is a “willingness to address the unprecedented reaction from members and the market”.

“Any solution is of course dependent on the CII being interested in pursuing a mutually agreeable and satisfactory outcome for all,” he said.

Richards said he has recently offered five possible avenues forward, one of which was to agree a fresh commitment to independent mediation but this time to include a representative panel from the membership.

His rationale for this was to allow for a greater level of member involvement, extended independent oversight and a greater level of transparency.

However, he noted that on reflection “if the first independent mediation broke down, perhaps the CII would not be prepared to enter into a second attempt”.

As a result of this, Richards now feels an independent review might be the only way forward to provide the clarity both boards are seeking.

“I mean a straightforward, inexpensive and relatively quick independent review of both the CII and PFS operations, finances and assessment of the claims each have publicly made based on evidence,” he said.

Another route forward in Richards opinion, would be a return to the status quo.

“Of course the simplest and most obvious solution would be for the CII to acknowledge, respect and value member feedback. They could demonstrate true professionalism and leadership by allowing the PFS to return to its original, autonomous and independent structure pre-July 2021,” he said.

“The PFS board in return could agree full financial support by utilising its reserves to address the CII's immediate challenges and also agree ongoing financial support to avoid future financial issues, which might otherwise impact both bodies and the quality of service to the membership. 

“Members deserve the respect and recognition to have a voice, the CII needs to pause and listen.”

Richards, who stood down from the PFS in 2021, sat at the helm of the professional body for eight years as chief executive and also served as managing director of engagement at the CII since 2016.

Under his leadership, the PFS recorded positive membership growth year on year, totalling over 40,000 individuals and over 200 associate firms whilst also strengthening the society’s overall financial performance.

jane.matthews@ft.com