Once upon a time, there was a very respectable firm of insurance brokers
called Hogg Robinson. Like all insurance brokers, it had a life and pension
arm which was known as Advizas. But, for whatever reason, Hogg Robinson
decided it did not like life and pensions and put Advizas up for sale.
Along came a publiclyquoted company which is reputedly the second-biggest
IFA in the land. It begged: “We will have Advizas. Please sell it to us.”
Towry Law, the purchaser in question, consulted its solicitors and had a
purchase contract drawn up which should have been full of warrants to be
signed by the directors of Hogg Robinson stating there was nothing untoward
in this deal. Indeed, Towry Law went to the nth degree to prove everything
was fine and asked an investigating firm of accountants to carry out due
Now, the one reason why most sales of this nature have not proceeded is
because of a certain matter that has been ongoing for several years and is
known as the pension review.
It just so happens that Advizas was apparently very good at advising its
clients into inappropriate pensions and we now hear of astronomical claims
againstthe firm. It would appear that if Towry Law had been called upon to
foot the whole of Advizas' compensation bill, it could have been insolvent.
But along comes a knight in shining armour, AMP, a well-known Aussie life
insurance company. It offers £75m for Towry Law, a portion of which
will be allocated towards these claims against Advizas. The remainder will
goes to the shareholders of Towry Law – yes, some of those guys who carried
out this purchase.
Well, you are all asking, what has that got to do with every IFA in the
land? Well, the facts are that none of us was any party to this contract.
We did not even know about this contract.
However, something that we contribute to, known as the Investors
Compensation Scheme, is going to fundthe difference between what has been
allocated and what the real claim may be, despite the fact there is a
£45m surplus which will be going to the directors of Towry Law – you
remember, these guys who knew about the contract.
These are questions that everyone should be asking:
Did Towry Law's solicitors put appropriate warrants in this contract
meaning that Hogg Robinson still has liability under the pension review?
If these warrants were not put in the contract, then has Towry Law got a
case against a very wealthy firm of solicitors which carries professional
indemnity insurance cover?
If everyone knew there were no warrants and everyone was happy about that
because of the wonderful due diligence carried out by the accountants, then
why is Towry Law not suing this very wealthy firm of accountants which also
carries professional indemnity insurance?
Why, when there is £75m on the table, should not all that £75m
be applied towards this pension compensation?
Did any IFA in this country know that the amount they contribute to the
ICS was going to be applied to remunerate the directors of a
publicly-quoted IFA who have taken excellent salaries from this company for
many years and actually perpetrated this deal and do not seem able or
prepared to sue their advisers or the vendor?
If you agree with using ICS money in this way, I think you should keep
quiet. Alternatively, you may feel fairly aggrieved that next year's
contribution is going to be significantly higher to bale out the well-paid
directors of Towry Law.
Now, there may be more to this than meets the eye but I do think it would
be a mistake to meekly stand by and not find out how all these apparently
wealthy parties have managed to shift their liability on to an innocent
party which had nothing to do with this deal whatsoever – namely, us.
Peter Hargreaves is managing director of Hargreaves Lansdown