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, up 72 per cent from £551,975 in 2011.
Foster Denovo’s annual results, published last week, 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 for clawback commission is expected to be used over the next four years.
Foster Denovo has not disclosed the nature of the claims payable but says there is no provision in relation to the FSCS or Keydata.
In its results, the firm 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 Foster Denovo paid £350,000 to acquire the corporate division of wealth manager Barker Poland in June and 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.
Bloomsbury Financial Planning partner Jason Butler says: “There is a higher risk of claims where you have a business that is more sales orientated. In order to keep claims to a minimum you should ensure you have water tight processes and are giving advice for the right reasons.”