The Chartered Insurance Institute has said it is sad, but not surprised, at the Personal Finance Society’s reaction to the evidence of its alleged governance failings.
In an update to members on Friday evening (January 27), CII group chief executive officer Alan Vallance said it was important to provide individuals with an update, which he didn’t see as appropriate to do until the PFS member consultation period was coming to an end.
“There has been a lot said and written over the last few weeks about the CII group board’s decision to appoint further institute directors to the PFS board,” he said.
“I’ve also received many emails and some letters from PFS members. If you are one of the people who have sent them in, thank you. I’ve read all of them, and today I want to address each of the main concerns raised.”
Last week, the CII hosted a series of live Q&As with local institutes, PFS regional councils and general insurance societies.
He said: “We are currently navigating an unavoidably difficult period, with some very vocal critics. However, as painful as it is, we will come through it.”
Interim chief executive at the PFS, Don MacIntyre, has since acknowledged the CII's Friday update, as well as a letter sent by the CII to the PFS board on January 25.
MacIntyre told members in an update today: "Friday’s message and the CII letter to the PFS contains information that is extremely important to address, and I will be taking this content to the board before any formal comment.
"I continue to maintain that it is not helpful for the situation facing the CII and the PFS to be played out publicly in the media, with messages and assertions continuing to find their way into the public domain.
"Considering the best interests of the organisation and of its members it is not appropriate to comment on these matters at this time."
Governance failures
Vallance said the CII wrote to PFS representatives to make them aware of its governance concerns on multiple occasions throughout 2022, and this culminated in legal correspondence detailing the governance failures in November.
“This makes it very disappointing to continue to see members of the PFS board saying they were not made aware, and that the CII has not previously raised any governance concerns with the PFS,” he said.
“This is simply incorrect.”
In December, the CII announced its decision to appoint a majority of directors to the PFS and three institute directors to the PFS board with immediate effect, following failed mediation attempts.
At the time, the CII said in order to “guarantee the highest standards of governance”, after a 30-day consultation period has elapsed, the CII group board intends to form a majority by appointing a further institute director to the PFS board.
In the member update, Vallance said the CII group board carefully reviewed the detailed evidence in December and made its decision to appoint further institute directors based on that.
However some PFS board member directors and co-opted advisers called for more evidence of the governance failures to be provided.
Following this, last week (January 25), the CII sent evidence which supported all the concerns raised with PFS representatives during 2022 to the PFS board.
“Very disappointingly, these detailed governance failures were dismissed within hours at a CII webinar, by a PFS member director as being neither serious nor significant governance failures,” he said.
“This is an astounding reaction, but very sadly it is not a surprise. For many months, the CII has raised concerns about individuals operating without informing, or having authority from, the PFS board. This cannot continue.
“However, this is now a matter for the PFS board, and I urge all members of the PFS board to work together to review these governance concerns as swiftly as possible.”
The financial position of the CII group
Elsewhere in the update to members, Vallance said some people believe that the decision to appoint further institute directors to the PFS board is not about the governance failures that emerged last year, but instead about the CII’s financial position and the PFS reserves.
“That’s just not the case,” he said. “I've been the chief executive of the group for just over five months now. When I joined, I knew that I was coming to a fantastic organisation with two professional membership bodies in one, the CII and the PFS.
“But I also knew that it had been through a challenging period, financially, operationally and because of the pandemic.”
A chartered accountant by profession, Vallance said the CII group “weathered the financial storm created by the pandemic”, while investing in new IT systems, bought out the group pension fund, and deliberately used the group's central reserves, leaving the PFS reserves, and other company reserves, untouched during that period.
“This was also discussed in detail at the Institute’s AGM in October 2022, along with the need to establish a new recharge model going forward, which fairly reflects the costs of the organisation being shared across the group as a whole,” he said.
“Don MacIntyre, the PFS interim CEO, and I both agreed some time ago that a change to the recharge model is required, and this will ultimately be for the CII and PFS to decide together.”
He explained that the PFS reserves, which have built up over many years to about £20mn, can only be invested in and used for the PFS.
“The newly composed PFS board will continue to be mandated to focus entirely on protecting and serving the interests of the PFS,” he said.
“For the avoidance of doubt, there is nothing preventing the PFS board spending the reserves, and under its objectives this money must be invested by the PFS.
“For example, there are currently five business cases awaiting PFS board consideration around learning and assessment activities.”
Vallance added that he could not comment “on what went before my time”, but wanted to reassure everyone, and the entire PFS membership, that there are absolutely no plans whatsoever to deregister the PFS.
“From the moment I joined the CII in August last year, I saw no merit at all in deregistration,” he said. “Like you all, I want to see a successful PFS thrive as a high-profile professional membership body.”
Speaking at a PFS event earlier this month, Vallance said “the decision to appoint additional directors was not an outcome we wanted…it was in the best interest of members and it was the right thing to do”.
A few days prior in a statement, the PFS said it wants to "move past this period of turbulence" and bring "stability back to the PFS".
FTAdviser has approached the PFS for comment but it had not responded at the time of publication.
sonia.rach@ft.com
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