Cover story: Inside the CII-PFS civil war

A civil war has broken out between the Chartered Insurance Institute (CII) and its subsidiary, the Personal Finance Society (PFS).

It all started at the end of last year, on 21 December, when the CII surprised PFS members with an early Christmas present: it appointed three new institute directors to the PFS board with immediate effect. As an extra gift, the CII said it was aiming to form a majority on the PFS board, with the appointment of an additional institute director scheduled after a 30-day consultation.

Tensions between the CII and PFS members are not new, but the actions of the former in December led some of the latter to christen the events a ‘Christmas Coup’.

I cannot support the actions taken by the CII. They have treated members with utter contempt

In a statement on 5 January, CII chair Helen Phillips was adamant the timing had not been deliberate.

“The decision to appoint further institute directors to the PFS board was not an outcome the CII board wanted or pursued, particularly during the festive holidays,” she said.

CII lights the fuse

The CII’s actions and its subsequent statements have raised more questions than answers among PFS members.

As the PFS is a subsidiary of the CII, the articles of association give the CII board the right to equalise, or appoint a majority of directors to, the PFS board.

For the avoidance of doubt — there is no plan
whatsoever to de-register the PFS

Phillips explained that the move had come as a result of failed independent mediation, as well as “serious and significant” governance failures at the PFS.

Among the failures 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.

A spokesperson for the CII told Money Marketing these failures had been raised repeatedly with the PFS but had been neither acknowledged nor acted upon. For the CII, the serious governance risks were not acceptable.

Phillips said: “The CII team has worked hard for many months, initiating independent mediation and responding to the PFS board’s demands diligently, professionally and with immense goodwill.

A double impact on exam and membership revenue should make the CII think again

“Therefore, it is deeply disappointing that independent mediation has failed, and serious and significant governance failures have arisen, which leave the board with no alternative but to take this action at this juncture and resolve matters without further delay.”

The CII guaranteed there would be no change to any of the services received by PFS members and it would continue to “provide and maintain all PFS member services”.

In addition, CII chief executive officer Alan Vallance justified the three appointments to the PFS board, saying they would bring “immense professionalism and exceptional experience”.

He added: “The newly composed board will continue to be mandated to focus entirely on protecting and serving PFS interests.

People will generally avoid disruption if they can. I don’t think everybody’s going to be running out the door

“The CII team will work with the new PFS board to embed best practice and establish the long-term governance arrangements that will ensure PFS members receive all the services and support they deserve without further delay.”

PFS members return fire

None of these statements reassured PFS members about why the ‘Christmas coup’ had been necessary.

The action had received intense criticism from the start. On the day of the announcement, former PFS president Sarah Lord condemned the CII’s “aggressive” behaviour.

She said: “This is a deeply cynical move by the CII and the orchestration of the announcement we have witnessed today shows this is a premeditated decision.

Why would any professional adviser want to be aligned with an organisation such as the CII with such a poor reputation

“I have, until very recently, been in conversations with the CII leadership and we have engaged in mediation at their request. The conversations were still under way. It is extraordinary that they have been so disingenuous.

“Acting in this way today, and in such an aggressive way, is likely designed to diminish the existing PFS board’s powers and undermine its forward-looking strategy.”

Garry Hale, another past president of the PFS (2012–13), was also suspicious of the CII’s choice of 21 December for its announcement.

“The timing of this, on the eve of Christmas celebrations, is a blatant attempt to avoid scrutiny, avoid CII/PFS member backlash, avoid journalists’ questions, and prevent regulators and politicians from actively understanding or mediating the decision, in the full knowledge that the majority of the members, sector journalists and regulators will be off work and with their families, in many cases for the first time in three years,” he said.

Allies in battle

It was not only among former PFS presidents that the ‘Christmas coup’ triggered negative feedback. Caroline Stuart resigned from her roles as PFS president and member director of the PFS board on 5 January.

Governance failings were repeatedly raised with the PFS that were neither acknowledged nor acted upon

In a statement, Stuart said: “The untold pressure that the PFS board is currently under is now also at the detriment of my health and I have taken the very difficult, but I feel only, decision available to me to preserve my own health, and have resigned my position as president and member director of the Personal Finance Society, with immediate effect.

“As a member of the PFS and the PFS board, I cannot support the actions taken by the CII and, by implying they are forming the majority without consultation, they have treated members with utter contempt.

“My fellow member directors and I completely and strongly refute all allegations made by the CII in respect of governance failings and, despite numerous requests to provide evidence of these governance failings, to date none has been forthcoming.”

Call to arms

Nor have other PFS members been idle. In an email to members on 22 December, PFS fellow Alasdair Walker shared his worst fear: “[Yesterday] the CII contacted the PFS membership with an email filled with misinformation and half-truths.

I want the PFS to be a successful, thriving professional membership body

“The truth is this: the CII is running out of money, and they want unfettered access to the £19m of PFS member funds which are currently held in reserve for the PFS.

“Make no mistake – without our swift action, PFS members will find themselves the poor younger siblings of an ailing general insurance membership body.

“The CII’s plan of action appears to be simple: flood the board with a majority of CII directors, and force a vote to deregister the PFS. This has been tried before, but the stakes are higher now because the CII’s coffers are empty.”

On the same day, Walker launched a campaign aimed at preventing the CII from seizing the PFS board.

The campaign website states: “We do not want to be subsumed by a professional body of insurance practitioners. We will not be treated as a cash-cow.”

I am concerned that you will use the majority to take the PFS member reserves by stealth

On 23 December, Walker emailed his fellow members again, encouraging them to write to PFS interim chief executive Don MacIntyre. The goal was to constrain the CII and organise an emergency general meeting (EGM).

This call was repeated on several occasions throughout January.

Tactical advice

However, Intelligent Pensions technical director Fiona Tait pointed out that, under CII rules, organising an EGM would require requests from around 2,000 PFS members.

Another former PFS president, Syndaxi Financial Planning managing director Robert Reid, expressed reservations about the potential outcomes of an EGM.

He said: “If we’re going to have an EGM, we have got to have complete clarity and know what that resolution is about. What do you want to happen next?

You have failed to control the spending of your executive leadership team

“There’s a wish for an EGM but I’m not sure they understand what their strategy is. What are they exactly calling for?

“Are these things attainable? There’s no point putting together a wish list if nothing in this wish list is possible. You have to be pragmatic.

“The person who called for the EGM has to be clear and concise by view of what they want. I haven’t seen that yet.”

Reid added that PFS members should assume that the CII would not reverse its position.

Fog of war

Suspicions about the CII’s intentions towards the PFS clearly have a long history, spanning at least two decades.

In 2006 Dr Sandy Scott, former director-general of the CII, felt prompted to reject any suggestion that the CII had hijacked the PFS.

We have been rendered deliberately inquorate

At the time he stated: “I have no reason — and this is how I put it to the PFS board — not to wish the PFS to be as successful as it can be.

“I am group chief executive and I am remunerated directly on the importance of the whole group so, if the group does not hit its numbers, and that includes the PFS, that affects me.”

Fast-forward to December 2022 and Walker’s emails illustrate not only that PFS members doubt the CII’s explanations but that they suspect the organisation’s real motives.

This was reinforced in an email to Phillips on 9 January in which PFS member director Vanessa Barnes asked whether the CII’s real intention was to take control of PFS reserves.

There’s no point putting together a wish list if nothing in this wish list is possible. You have to be pragmatic

In fact, she accused the CII of already using PFS funds to meet its financial obligations.

Barnes wrote: “You and your leadership team have asked for retrospective payments towards the transformation project, unilateral increases to the PFS recharge, credit facilities and loans; and, at the same time as you announced a financial recovery, the PFS board was asked to agree a £2m grant as the CII cash position was in the red by several hundred thousand pounds.

“You have made a public announcement regarding the allocation of funds to complete the buyout of the defined benefit scheme, and yet you have demanded funds from the PFS in order to meet your obligations.”

We will not be treated as a cash-cow

Barnes also rejected a previous claim from Phillips that the PFS could be accumulating reserves in an unfair way.

Barnes said: “This is not true. You have failed to control the spending of your executive leadership team.

“The PFS reserves have accumulated from the work of our former CEO, past and present board members, volunteer networks and diligent, committed membership.

“In recent years, the development of sponsorship revenue has accelerated those reserves that should be invested by a practitioner-led board in improved member services.

“We have been rendered deliberately inquorate and, when a formal complaint was made by the PFS board, you did not act as a proper independent chair.”

Without our swift action, PFS members will find themselves the poor younger siblings of an ailing general insurance membership body

Among her other criticisms, Barnes claimed that HM Revenue & Customs had accused the CII of “careless filing” and that the CII had concealed this information.

Seizure of reserves is not the only thing PFS members suspect the CII of plotting. They also fear it may seek to de-register their professional body.

Phillips reassured members there was no plan to do this, in a statement published on 5 January.

She said: “The CII board remains deeply committed to its PFS members and — for the avoidance of doubt — there is no plan whatsoever to de-register the PFS.

“The CII board sees no merit in such a move and wants to see the PFS flourish as a professional membership body.”

Vallance reiterated this point at a PFS board consultation on 20 January.

He said: “From the moment I started, in August last year, I’ve never seen any merit at all in doing that, and I can’t see the merit in the future.

My fellow member directors and I completely and strongly refute all allegations made by the CII

“I want the PFS to be a successful, thriving professional membership body.”

But PFS members remain unconvinced.

“I recognise that you have changed your strategy with regard to the attempts to de-register the PFS following three failed attempts,” wrote Barnes. “I am concerned, however, that you will use the majority to take the PFS member reserves by stealth.”

In the meantime, the CII denied it had appointed three institute directors to the PFS board for any other reason than governance failings at the body.

On 9 January a CII spokesperson told Money Marketing: “Governance failings were repeatedly raised with the PFS that were neither acknowledged nor acted upon, leaving the CII board with no choice but to address these failings.

Acting in this way, and in such an aggressive way, is likely designed to diminish the existing PFS board’s powers

“Sadly, any suggestion that the CII board has appointed further institute directors for any other reason is deeply misleading.”

Jumping ship?

Despite the vocal opposition, the CII is set to proceed with its plans.

Yet there could be negative consequences. Indeed, PFS members may vote with their feet — cancelling their membership and moving to another professional body. In early January, Phoenix Wealth Management managing director Brendan O’Ciobhain said he would cancel his membership of the PFS if the CII took control of the PFS board. He added he would be a “vocal advocate” for other financial advisers to do likewise and find a “more suitable home”.

The CII team will work with the new PFS board to embed best practice

Also in January, Insurance Institute for Shropshire and Mid-Wales deputy president and former PFS chartered ambassador Robin Melley said some PFS members were considering the jump.

Speaking to Money Marketing, he said: “Members told me they will be moving to another professional body for their statements of professional standing [SPS] when they come up for renewal.

“Why would any professional adviser want to be aligned with an organisation such as the CII with such a poor reputation; and now, by association, the PFS?

“Many of the PFS members who are not chartered and are mainly interested in an SPS to operate will move to the CISI [Chartered Institute for Securities & Investment] and the LIBF [London Institute of Banking & Finance] to divorce themselves from the tarnished reputation of the CII and now the PFS, particularly if the CII does achieve its ambition to force control of the PFS’s assets and revenue stream.”

Of course, some chartered advisers might be reluctant to transfer to another professional body, acknowledged Melley.

It is deeply disappointing that independent mediation has failed

“From a commercial perspective it makes little difference because clients would carry on dealing with the adviser irrespective of them being chartered,” he said.

“However, collectively we have all been working to build a profession that has parity of esteem, and one of the features of a profession is being chartered.”

The CISI and the LIBF are often mentioned as the two most likely destinations for ex-PFS members. The CISI has 26,622 members, around 1,000 of whom joined it in 2022. The LIBF similarly boasts over 26,000 members, who work across banking, financial advice and mortgage advice.

Yet Reid warned it was too soon for disaffected PFS members to jump ship, adding he did not expect a significant exodus.

“That’s ridiculous. It is far too early. Do the other organisations have the capacity to take on a lot of people at once?

“People will generally avoid disruption if they can. I don’t think everybody’s going to be running out the door.”

This was not an outcome the CII board wanted or pursued, particularly during the festive holidays

Financial Vulnerability Taskforce chairman and former PFS CEO Keith Richards thinks the CII should reconsider its plans, for its own sake as well as for PFS members.

He warned that the organisation’s recent actions would further tarnish its image in the face of lasting problems around professional exams and IT systems.

Richards said: “There has been a lot of reaction to CII exams and the poor experiences of the past two years, especially the remote-invigilation exam issues, which are well documented.

“A double impact on exam and membership revenue should make the CII think again and consider the views of the membership and the wider market before ploughing on. The long-term impact may otherwise prove catastrophic.”

Route to a ceasefire?

Richards recently described in the media some possible routes to a ceasefire between the warring parties.

One idea was an independent review to provide clarity for both the CII and the PFS boards. Richards stressed this review should be “straightforward, inexpensive and relatively quick”.

It would investigate the operations and finances of both parties alongside the public claims each had made, based on evidence.

Another route Richards mooted was a return to the status quo.

If you’re going to have an EGM, what do you want to happen next?

He said: “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.

“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.”

This article featured in the March 2023 edition of MM. 

If you would like to subscribe to the monthly magazine, please click here.