Customer care was “at the very heart” of troubled adviser network Financial Limited, founder Charlie Palmer’s lawyer has claimed as he attempts to overturn an FCA fine against him.
In December 2015, the FCA said it wanted to ban Palmer and fine him more than £86,500 for allowing appointed representatives of Financial Limited to give potentially unsuitable advice.
40,000 clients were put at “significant risk”, the regulator said.
The registered individuals in Financial Limited – which numbered 516 at their March 2011 peak – were allowed freedom and flexibility on a “light touch” basis, as opposed to following a tight centralised compliance process.
The FCA says the potentially unsuitable advice that followed involved high risk products such as unregulated collective investment schemes.
At his appeal of the fine in the Upper Tribunal yesterday, Palmer’s lawyer Guy Phillips QC said clients were front and centre of Financial Limited’s approach.
Phillips said: “Treating customers fairly was at the very heart of the business that Charlie Palmer created.
“This was a compliance business. The essential service offered by the firm to its members was assistance with regulatory compliance.”
Phillips cited a number of examples where Financial Limited had noted the significance of consumer outcomes.
These included a risk director’s report that said “consumer protections is the most important part of our work”, an early 2012 risk review that said management information to the board would be improved with a consumer focus, and an email from Palmer to Financial Limited’s chairman that said he wanted to move from an advice to a consumer led organisation.
The firm also put the risk of advisers giving unsuitable advice to clients at the top of a list of serious business threats in 2010.
Phillips said: “A business which is not concerned with treating customers fairly does not allocate the highest score to that particular risk.”
The FCA’s legal team noted that, as part of marketing materials, Financial Limited had used the lack of restrictions in their model – which included not having a panel of pre-screened investments and allowing advisers to follow their own business processes – as a key part of its pitch to get advisers to join under the tag-line: “maximum assistance minimal interference.”
In an interview with Money Marketing last year, Palmer revealed the Financial Limited board had decided on a “2 per cent error rate”; that is, that they were willing to accept one case of misselling in every 50 investment decisions.
Palmer was previously investigated by the FSA in 2009 and fined £49,000 in 2010 over the risk of unsuitable pension switching advice.
Phillips said that in a skilled person report into the firm’s activities, professional services firm Smith & Williamson had said that Financial Limited’s compliance function and management information presented to the board had “changed significantly” since the FSA’s visit.
Reviews into unregulated collective investment schemes and pension switching are ongoing, conducted by parent company Tavistock Financial, which acquired the Financial network in February 2015.