National IFA firm Foster Denovo has set aside a total of £3.3m for liabilities in 2012, including £2m to pay client redress.
Despite the provision, the company has increased pre-tax profits to £947,358 for the year ending 31 December 2012, up a massive 72 per cent from £551,975 in 2011.
Foster Denovo’s annual results, published today, show a total provision of £3.3m for 2012, made up of £2m to cover the cost of claims relating to unsuitable advice, and £1.3m relating to an expected clawback bill on indemnity commission.
The company says it expects to use most of the £2m to cover client redress claims in the next financial year, while the £1.3m set aside to pay clawback commission is expected to be used over the next four years.
It has not disclosed the nature of the claims payable.
In its results, Foster Denovo says: “In the normal course of business the company receives queries and complaints regarding the sale of financial products. Where appropriate these claims are investigated in accordance with the company’s procedures and provision is made for potential liabilities which may arise in respect of them.
“The provision is made gross of the amount recoverable from professional indemnity insurers and/or the financial adviser responsible for giving advice about which the complaint was made.”
The results also reveal that Foster Denovo paid £350,000 to acquire the corporate division of wealth manager Barker Poland in June. Foster Denovo also paid £35,000 for an unnamed “additional minor acquisition”.
The company says income was boosted last year by improved trading conditions in 2012, and expects to make a profit this year.
Staff costs, including directors, rose from £3m to £3.9m during the year. Directors’ pay and benefits went from £542,290 to £553,885 excluding pension contributions. The pay and benefits of the highest paid director went from £187,262 in 2011 to £217,585.