The Chartered Insurance Institute says it stepped in at its Personal Financial Society arm today after significant governance issues became apparent.
In a lunchtime press briefing with journalists today, CII CEO Alan Vallance said that the PFS had set up new committees without CII approval and also held meetings without informing CII directors who were entitled to attend.
These governance issues had forced the CII’s hand, he said.
He said: “We had a board meeting at the CII last week where we became aware the mediation had failed. That advice was given to us by the PFS chief executive.
“As a result of all of that the board discussed the matter and decided now was the right time to act so we’re acting today. There have been repeated examples where the two institute appointed directors – Gill White and Mark Hutchinson – have not been included in (PFS) board meetings and board discussions. That is a very serious concern.”
Mediation has been taking place between the two organisations, which have been at loggerheads for some time, over the past few months but was ended recently.
Mr Vallance said it was the PFS’s choice to end the mediation and the PFS decision to inform the CII the mediation was over prompted today’s move by the CII board to appoint new directors to give the CII more control over the PFS board.
Mr Vallance said the issues between the two organisations were purely about governance and the way the PFS board was run, not about finance as some have suggested.
He said appointed three new PFS board directors with substantial experience of governance would improve and strengthen the PFS board.
Financial Planning Today has asked the PFS board for comment.
The move today by the CII to take full control of the PFS could open the door to the PFS to try to split off from the CII or pave the way for a new body for Financial Planners to be established.
One of the PFS reform campaign leaders, Robert Reid of Chartered Financial Planners Syndaxi, told Financial Planning Today: “Today’s announcement comes as no surprise as the two bodies have become so heavily linked financially that one had to take control of the other. It’s a great pity that the dysfunctional part had to take control of the other part.
“It’s clearly time for the sector to determine a better way forward but I’m not sure the CII know how to deliver it.”
Mr Vallance said the PFS now had up to 30 days to consult with members over the changes.
Helen Phillips, chair of the CII, said earlier today: “This is not an outcome the CII group board wanted or pursued. 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.
“Therefore, it is deeply disappointing that independent mediation has failed, and serious and significant governance failures have arisen, which leave the CII group board with no alternative but to take this action at this juncture and resolve matters without further delay.”
The PFS is a subsidiary of the CII, and its articles of association give the CII the right to appoint directors to the PFS board.
The PFS board is currently made up of five PFS member director and two institute directors, with the CII today appointing three further institute directors which it said will, “equalise the PFS board with immediate effect.”
