When I was in primary school, I had two best friends. They were both called Sophie. And they hated each other.
There would be periods when they had made friends and we could hang out as a group.
Those times were fun, but I always had a sense of impending doom. Soon, they would fall out over nothing again and I would be stuck in the middle.
The rift between the Chartered Insurance Institute (CII) and the Personal Finance Society (PFS) is bringing back bad memories of those times.
It came to light in October that the PFS had spent £850,000 on “expert legal and financial advice” during its spat with the CII in the second half of last year.
From the CII’s point of view, it is all fine. It has put a majority of its employees on the board
“The PFS board brought in expert, external consultants to support the company directors’ legal, financial and communications efforts during their discussions with the CII on a future operating model of the company within the group,” the PFS stated in its annual financial report for 2022.
Much of the rest of this spending, it said, had been to enable the body to have its own communications function during a “sensitive and challenging” time.
Because the CII and PFS usually share a press office, the PFS hired an external agency — DRD Partnership — to handle its PR during this period. Normal service has now resumed.
“The complex nature of these discussions required expertise to enable the board to navigate new territory,” the PFS explained.
The CII should not underestimate the strength of feeling of the silent majority
“The decision to engage external consultants ensured the board received the best possible advice to support the effective discharge of their director responsibilities throughout this process.”
Further down in the report, listed under administration expenses, is £1.5m spent on “fees and services”. This figure compares with about £400,000 the previous year. It is not clear from the document exactly where the £1.5m was spent.
I asked the CII press office and was told the PFS had “nothing to add” to what was in the report.
Christmas Coup
The fallout, which is often referred to as the Christmas Coup, had been brewing for months.
It came to a head late last year when the CII Group announced it would appoint a majority of directors to the PFS board after “independent mediation failed”.
The self-inflicted saga created by the CII may have a deeper and longer-lasting impact than its management and board could have possibly imagined
The CII insisted at the time that a series of “serious governance risks” at the PFS had left it with “no alternative” but to step in. Among the risks listed were a “lack of collective decision making” by the PFS board and a failure to act in line with the articles of association approved by PFS members.
The CII’s action was met with disdain from PFS members and directors. PFS president Caroline Stuart said the decision by the CII board had come as a “huge shock”.
She stood down from the role with immediate effect on 5 January, stating that the “untold pressure” on the PFS board was “to the detriment” of her health.
Former PFS presidents Sarah Lord and Garry Hale also condemned the CII for its “aggressive” takeover of the PFS board, calling it a “deeply cynical move”.
Calmer times
After the furore last Christmas, everything went quiet for a while.
The next time I wrote about the subject, in July this year, it was to report that the PFS was recruiting two full members to serve as directors on its board.
I’m quite surprised a business of our size has sat on these funds for so long
This board is now made up of just three PFS member directors: Anthony Ward, Carla Brown and Daniel Williams. There are seven directors from the CII — Andy Briscoe, Catharine Seddon, Christine Elliott, Edward Grant, Neil Buckley, Neil Watts and Sarah Howe — and one lay director: Elizabeth Bastin.
Regardless of their roots, all these board members are under a legal obligation to act in the best interests of PFS members. But I would argue that ‘best interests’ is a subjective and movable term.
I met CII Group chief executive Alan Vallance in October and reported his belief that the two bodies were prepared to put the past behind them. In fact, most of our conversation was about the CII’s plans and how it and the PFS were going to work together more closely.
Vallance said recent discussions between the two bodies had been “very constructive”.
“That’s something we’ve relayed to our members directly,” he added.
Both the PFS and CII have a lot to offer the respective personal finance and insurance sectors, and should be leading the way
The boards have seen “a lot of the issues recognised” and some “constructive proposals formed”.
Furthermore, he said, “The CII Group is much more reassured about the PFS, which is really positive.”
Vallance has since announced he is leaving next spring to take up a similar role at the Institute of Chartered Accountants in England and Wales. That is less than two years since he became CEO of the CII in August 2022.
Before joining the CII, he had spent seven years at the Royal Institute of British Architects, so it is not as if he hops between different roles as a rule.
Under the carpet
There are PFS members and former members who are concerned that some of the issues that sparked the Christmas Coup have been brushed under the carpet.
Vallance and PFS interim chief executive Don MacIntyre sent out a joint statement, saying: “We have stated clearly and repeatedly to members over recent months that the CII and PFS are now moving forwards together.
I completely respect the 300 people who have signed Alasdair’s petition. But I cannot, as CEO, listen to only 300
“We understand that some members may still have concerns and we are listening carefully. All our time, energy and resources are now fully invested in building a stronger future and delivering exceptional services for our PFS and CII members.”
Former PFS member director Vanessa Barnes says: “From [the CII’s] point of view, it is all fine. It has put in a majority of its employees. The PFS, previously, has always been the majority of member directors, so the board was led by the profession itself. Now the CII has parachuted in a number of appointees, who it pays to control the board.”
Barnes was one of the member directors who spoke out during the Christmas Coup. She stepped down from the board, along with fellow member director Gordon Wilson, in June this year.
I don’t understand why people aren’t more bothered that basically £10m of their money has been taken
“During the [PFS] annual general meeting [AGM — in September], the so-called independent chair was talking about having only just put his feet under the table,” she says.
“The moment Gordon and I resigned, they appointed these new people. And, within 48 hours, they’d had a meeting and approved the accounts.
“How can you say a month later that you don’t know what’s going on, but you were able to approve the accounts?”
Barnes says what usually happens is the story is “twisted into, ‘What’s good for the CII is good for the PFS’”, because the PFS is dependent on the CII.
“Using that as an excuse to get around your fiduciary responsibilities is not good, in my opinion,” she says.
Adviser concern
Advisers have expressed concern that the CII may still look to deregister the PFS.
Former PFS CEO Keith Richards points out that the CII has attempted to wind up the PFS as a legal entity on three occasions, in 2017, 2019 and 2021, which he says was “without logic or plausible explanation”.
The news of these attempts was “understandably met with shock and bewilderment by the volunteer member network, members and the wider market”.
Richards continues: “The flooding of the PFS board with CII-appointed directors to gain a majority control is seen by many as a cynical strategy to take away the independence the PFS once enjoyed. This outcome has further impacted trust, with some looking to transition to other professional bodies as a direct consequence.
The insurance sector is not necessarily in decline, but it’s the skilled insurance broker bit that is dwindling
“The CII has come under criticism from not only the personal finance membership, of course. [There were] challenges faced from the insurance sector at its last two AGMs. So, the issues are wider than the independence of the PFS.”
There have also been accusations that the CII is after the PFS’s money.
In January, Barnes wrote an email to CII Group chair Helen Phillips, asking whether the intention of the CII was to take control of PFS reserves. She also acknowledged the CII’s commitment to not deregister the PFS.
In a LinkedIn post at the end of last year, CII director of communications Chris Shadforth insisted that the decision of the CII Group board to appoint additional directors to the PFS would not result in cash being moved from the PFS to any other company within the institute’s group of companies in any way different from then.
“Money already flows between the companies in order to pay for the services PFS members receive from the group,” he said.
Chartered financial planner Alasdair Walker used to be an active member of the PFS, but since early 2022 he has stepped back from duties, including chairing the body’s Expert Practitioner Panel.
How can you say you don’t know what’s going on, but you were able to approve the accounts?
In October, he reignited his campaign to “save” the organisation and urged the board to “act in the best interests of members”. He had launched the ‘Our PFS’ campaign when tensions erupted at the end of last year.
Walker believes the CII is running out of money and is, therefore, leaning on the PFS.
“The insurance sector is not necessarily in decline, but it’s the skilled insurance broker bit [that is dwindling] — i.e. the people who pay the CII their membership fees. It just doesn’t exist as much anymore,” he says.
Because of this ‘de-skilling’ of the sector, insurance membership has dropped, while personal finance membership looks to have remained steady at around 40,000.
Walker is not the only one who feels that way. He wrote to the PFS board in October, setting out his concerns and asking a series of questions about what he felt was the PFS’s lack of autonomy, plus the fact that PFS member funds were still being held in a CII-controlled account.
The PFS, previously, has always been the majority of member directors, so the board was led by the profession itself
He also sent an open letter to PFS members that, on last count, had received around 300 signatures.
“I don’t understand why people aren’t more bothered that basically £10m of their money, which they have contributed to a non-profit professional body, has been taken,” says Walker.
“Nobody seems to care.”
Where’s the money?
In September last year, Money Marketing reported on concerns from PFS members that £10m was still being held by the CII. Prior to this, the CII was holding £19.97m on behalf of the PFS.
A spokesperson for the CII told Money Marketing at the time that the CII had transferred £10m of this outstanding balance to the PFS in August.
This was confirmed by then PFS president Sarah Lord at the PFS’s AGM in September 2022.
We understand that some members may still have concerns and we are listening carefully
But it is not entirely clear where the remaining £10m has gone.
In its annual report for 2022, the CII says the “amount owed to subsidiary undertakings” now stands at £11.8m, bearing in mind that the PFS is not the CII’s only subsidiary.
Responding to the question of whether £10m is still being held in a CII account, MacIntyre says, intriguingly, that this statement is both correct and incorrect.
“When I arrived, there was initially £10.2m in an account in the name of PFS, and that was transferred,” he tells Money Marketing.
He says he did not feel comfortable with a large sum of money sitting in a single account, so he put it into an investment. It grew to £10.7m.
“In addition, we have what’s known as the intercompany balance,” he continues.
“That is put into a number of accounts because the CII has an active treasury policy.”
MacIntyre insists he would want an intercompany balance of at least £5m, which allows him to “balance cashflow” as the business grows. He wants to ensure the funds are set aside for things such as regional events and annual conferences.
We have stated clearly and repeatedly to members over recent months that the CII and PFS are now moving forwards together
What is more, the CII has an outstanding issue with HM Revenue & Customs (HMRC), based on previous tax years.
“That is an exposure of £2.5m. We have to have that set aside in case HMRC says we still owe that number.”
He insists the intercompany balance is reported to the board on a monthly basis.
“At no stage does the board not know exactly where these funds are.”
The PFS and the CII are currently “looking at moving [the money]” so it sits in PFS accounts. But, until there is a “robust treasury policy”, endorsed by the board, he is not willing to move additional funds into a “stagnant account”.
MacIntyre also says that, as the PFS looks at getting a more robust business plan and a clearer strategy, and at improving its annual report, there are a number of things he hopes to do that will mean “stronger transparency to the members”.
The complex nature of these discussions required expertise to enable the board to navigate new territory
He wants to start spending the funds for the benefit of PFS members.
“I’m quite surprised a business of our size has sat on these funds for so long.”
He also wants to speak more to members and find out what they want from the professional body.
“I completely respect the 300 people who have signed Alasdair’s petition. But I cannot, as CEO, listen to only 300. The systems and structures we have in place at the moment aren’t good enough for me to speak to all of our members.”
He wants to improve this.
Lack of trust
Sadly, everything that has happened publicly in the past year, and behind the scenes in the years before, has doubtless affected trust in the CII and, to an extent, the PFS.
The decision to engage external consultants ensured the board received the best possible advice
Richards believes the CII is potentially facing a “deep-rooted” lack of trust among the PFS membership, “primarily of its own making”. He thinks the body is “out of touch” with the strength of feeling across the membership and “evident consequences”.
He says: “The self-inflicted saga created by the CII may have a deeper and longer-lasting impact than its management and board could have possibly imagined or fully understood.
“Unfortunately, the CII is generally seen as demonstrating a lack of good conduct, with little acknowledgement shown for the impact of its actions, exam and IT-system issues on members, despite regular criticism on social media and various trade-press articles over the past three years.
The CII Group is much more reassured about the PFS, which is really positive
“Couple this with the relationship issues created by the CII board with the PFS member director board, as well as failed mediation costing both organisations several million pounds in external fees.
“Then there are the attempts to control the narrative via PR, trying to discredit volunteer member directors of the PFS in public, which ultimately led to the resignation of the PFS president, Caroline Stuart.”
Richards warns that the CII “should not underestimate the strength of feeling of the silent majority”, or it will “continue to face a deep-rooted erosion of confidence and trust”.
He says: “It’s time to demonstrate change and a focus on the needs of the membership and the consumers it serves.
“It is within the CII board’s gift to address the deep-rooted impact it has caused over recent years, if there is a genuine intent to do the right thing for the PFS membership, CII and PFS.
At no stage does the board not know exactly where these funds are
“Both the PFS and CII have a lot to offer the respective personal finance and insurance sectors, and should be leading the way in respect of standards, professionalism and trust.”
Despite the insistence of the heads of both the CII and the PFS, I can’t help feeling there is still more trouble to come. As we go to press with this issue, the CII is due to hold its AGM on 30 November.
Will the CII and the PFS maintain their supposed new-found friendship? Or will the issues that appear to still bubble under the surface cause another ruckus?
This article featured in the Dec 2023/Jan 2024 edition of MM.
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Pure obfuscation, if you can put so much down regarding these two, then they should both be closed down,, and start again with one. So much time spent on total rubbish.
The CII is doing its ‘Everything’s fine, nothing to see here, move along’ routine, sure, but the reality is that it is a forced marriage in which the PFS bride is an unwilling partner who has had all her worldly goods confiscated. It’s an anschluss in all but name.
Oh come on Lois, this topic is getting boring. I well recall the CII disparaging the adviser community as “Those Life Insurance Salesmen”. The culture hasn’t changed and even your illustrations underline the fact that Personal Finance is still regarded as the junior partner. Better to join an organisation where personal finance is the core. Leave the CII to insuring Teslas.
I could not agree more, Harry. I well recall them making such disparaging references to the personal finance community. To their tiny minds, there was no higher calling than to be a fire inspector for Commercial Union. It must really stick in their throats that without the personal finance community, their cusjy jobs and platinum-plated pension scheme would have long ago ceased to exist.