Two further PFS Independent Directors resign following CII ‘takeover’

22/06/2023
Gordon Wilson

Pair will propose AGM motion to block £19m of PFS reserves being transferred to “another entity”

TWO long-standing independent directors of the Personal Finance Society have resigned from its board, citing “significant concerns” about the independence of the body, following moves by the Chartered Insurance Institute to take control of the organisation late last year.

Vanessa Barnes and Gordon Wilson, who between them have served as PFS non-executive directors for 11 years, have also expressed “deep misgivings” over the future of the Society’s £19m cash reserves if steps are taken to wind it up, and will 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 instead propose that, in the event the PFS is wound up, its reserves will be distributed amongst its members, who would each receive around £500.

Whilst the PFS is constituted as a subsidiary of the CII Group, its independent board members have a duty to act in line with the objects of the PFS – to facilitate the promotion of financial advice – and at no time in its history has the CII previously held a majority position on the PFS board.

However, four days before Christmas, the CII, which is also the qualification and accreditation body for the PFS’s 40,000 members, installed additional Institute employees onto the PFS board under the pretext of “serious failures of governance.” This was done without any consultation with the PFS board.

Vanessa Barnes, who founded her successful business in 1996 and has served on the PFS board for six years, 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 £19m 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. The steady erosion of CII reserves from £38m in 2016, together with a £21m 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, we will be submitting a formal motion to the Society’s AGM in September, giving members the opportunity to change the articles to 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 £19m, 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.”

Since March 2021, the CII has been attempting to persuade PFS 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.

Following the PFS board making it clear that, due to these concerns, they were unable to approve the use of PFS funds to guarantee the loan, the CII used its position to take control of the PFS board.

Gordon 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.

“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.

“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.”

Vanessa Barnes added:

“The undermining of the profession’s qualification framework and the fact that the Institute now controls the UK’s largest membership organisation for personal finance does nothing to promote financial advice, support consumers or to strengthen market integrity.

“We will therefore be taking steps to protect the interests of all 40,000 members via a resolution to the forthcoming AGM which will propose that the Society’s funds should be handed back to the members if it is wound up, rather than being transferred to another body.

“It’s a simple process which rightly gives all members their democratic say in what happens to those funds and I can see no legitimate reason to object to it.

“However, if there are any moves by the current board to block our proposal from being put before the members, alarm bells should be ringing loudly amongst financial advisers right across the country.”

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