Two long-standing independent directors of the Personal Finance Society have resigned from its board, citing “significant concerns” about the organisation's independence.
In an announcement today, the PFS said Vanessa Barnes and Gordon Wilson, who between them have served as PFS non-executive directors for 11 years, had expressed “deep misgivings” over the future of the society’s £19mn cash reserves if steps were taken to wind it up.
The pair said they would propose a motion to the forthcoming PFS annual general meeting in September to block the CII or another entity from gaining control of the funds.
The motion will propose that, in the event the PFS is wound up, its reserves will be distributed amongst its members, who would each receive around £500.
In December the CII announced it would 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.
Barnes said said: "The 40,000 members of the PFS should be aware that, according to the society’s articles, if steps are taken to wind it up - for example to subsume it into another organisation - the entire £19mn can be transferred into another entity, rather than going back to the members, whose hard work and fees have built up the reserves over many years.
“It is well known that the CII’s financial position has deteriorated significantly in recent years, and many PFS members have expressed deep misgivings to us about what will happen to the society’s reserves if steps are ever taken to wind up the organisation.”
Barnes founded her business Hannay Wealth in 1996 and has served on the PFS board for six years.
She said: “The steady erosion of CII reserves from £38mn in 2016, together with a £21mn cash injection from the sale of its former headquarters building, demonstrate a significant lack of financial management which the Institute seeks to blame on Covid-19 or the still-undischarged costs of the defined benefits scheme.
“It is clear that the CII now has de facto control of the PFS board, having nominated its own representatives over recent months, combined with the subsequent departures of long-standing and highly-respected figures in our industry.”
With this in mind, Barnes said she will be submitting a formal motion to the society’s AGM in September.
This will be to give members the opportunity to change the articles and ensure that if proposals are ever brought forward by the board to wind up the society, all available funds will be transferred back to the members themselves, rather than being handed to a successor body.
“If there is no intention to get control of the £19mn, I can see no reason whatsoever why any PFS board member would object to that proposal, but it will be very interesting to see the response to what should be a simple and straightforward vote,” she added.
The PFS said since March 2021, the CII has been attempting to persuade directors to either act as a guarantor or provide loans and grants to the Institute.
Having appointed external advisers to carry out due diligence on the request, the PFS board was advised of concerns regarding the CII’s financial forecasts and was told there was a significant risk that the CII would not be able to repay the loan it was requesting from the PFS.
Wilson, a director of the PFS since 2018, said: “Vanessa and I are both deeply disappointed at having to step down, but we feel we’ve been left with no choice.
“We both joined the board as volunteer, non-executive directors because we had deep respect and admiration for the work of the PFS, and because we wanted to give something back to the profession.
“The PFS has helped us greatly in our careers and in the growth of our businesses and we share the values of professionalism, integrity and trust.”
Wilson said over the past year, the CII “has worked assiduously to gain effective control of the PFS” and it has now manifestly achieved that ambition.
“We have fought hard on behalf of the PFS and its members, but the CII is now firmly in control and the PFS has lost its position as the voice of our profession,” he said.
“The latest member consultation results made it crystal clear what the PFS members want but neither the CII-controlled PFS board nor the CII has embraced or acted upon it.
“Instead, the members’ wishes have been ignored because the CII doesn’t like any of the conclusions.”
Meanwhile, Barnes said if there are any moves by the current board to block the proposal from being put before the members, “alarm bells should be ringing loudly amongst financial advisers right across the country”.
In January, Caroline Stuart, former president of the Personal Finance Society stepped down with immediate effect.
In a joint statement from Alan Vallance, chief executive of the CII Group and Don MacIntyre, interim CEO of the PFS, they said: “The PFS board has today accepted the resignations of Vanessa Barnes and Gordon Wilson and we thank them for their service over many years.
"The remaining members of the PFS board met today to approve the appointment of new interim member directors, pending the outcome of a formal recruitment process that will begin immediately. Their appointment will ensure that the PFS board can meet in quoracy and immediately resume serving our PFS members, including investing the PFS reserves in ways which best serve PFS member interest including compliance with meeting the FCA’s cConsumer duty regulations."
Vallance and MacIntyre added: "As has been repeatedly stated over the past 12 months, there is no intention or value in deregistering the PFS. Ensuring good governance is in place across the group has always been our priority, and the CII will continue to support the actions the PFS board considers necessary to ensure compliance with corporate governance best practice.
"We look forward to the PFS board now channelling all its energy and resources into building a strong future for PFS members.”
sonia.rach@ft.com
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