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‘One in 50 cases missold is acceptable’: Ex-Financial Ltd chief Charlie Palmer opens up

charlie palmer

Former Financial Ltd chief executive Charlie Palmer has defended how he operated the troubled business, including a board policy anticipating one in 50 clients would experience misselling.

In an interview with Money Marketing he gives his side of a story that saw the network face the full force of the regulator’s microscope and eventually be sold.

In a final notice published in December 2015, the FCA sought to ban and fine Palmer £86,691 for failing to ensure appointed representatives gave suitable advice to around 40,000 clients.

Palmer referred the matter to the Upper Tribunal with the FCA telling Money Marketing this week the hearing is unlikely to take place until next year.

In the decision notice against Palmer, the FCA said he failed to take adequate steps to ensure risks were managed effectively.

The regulator said Financial Ltd’s business model allowed ARs and individuals a high level of freedom and flexibility, putting around 40,000 clients at “significant risk” that they would receive unsuitable advice. The regulator says this includes high risk products such as unregulated collective investment schemes.

However Palmer disputes the regulator’s findings.

He says: “I don’t agree I did anything wrong. I’m not sure the notice says I did much wrong. The FCA has changed their case against me six times over four years.”

Palmer adds: “What are the findings? They are a breach of principle. There is no benchmark standard as to what is appropriate, there is no rule breach. In most enforcement action nowadays there are no rules broken and there are no guidance breaches either. It was simply that [the FCA thinks] your procedures are in breach of the FCA’s principles for business.”

Palmer also disagrees with the fine and explains the process Financial Ltd took in deciding the level of risk it was willing to take on misselling.

“As a board we decide what level of risk you are willing to take. That is the error ratio, you cannot sell 25,000 contracts a year without any misselling. You don’t accept any misselling but you have to have a level and the way you run the business that if it is not breached then you are happy to accept that.”

“We decided a 2 per cent error rate was acceptable so it was one in 50 cases sold or advised on is a wrong’un and we were happy to accept that level of error-rate, bearing in mind 49 people had a good deal for every one person that had a bad one. That level was never breached.”

A past business review into pension switching at Financial is ongoing and being carried out by parent company Tavistock Financial, which acquired the Financial network in February 2015.

There is also an ongoing review into Ucis sales.

If it is required, it is understood Tavistock will pay redress to consumers following the outcome of those reviews.

Palmer says around 250 of Financial Ltd’s advisers remained within Tavistock after the business was acquired while approximately 100 are now directly authorised.

Palmer is now chairman of compliance business IFA Compliance.

Of his current relationship with the FCA, Palmer says: “As a consultant I have a very good relationship with the FCA. There is no personal animosity. They have got a job to do and they do it.”

Palmer was previously investigated by the FSA in 2009 and fined £49,000 by the regulator in 2010 over the risk of unsuitable pension switching advice.

The FCA declined to comment.

Financialtimeline

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Compliance Thought 16th June 2016 at 12:19 pm

    Is this guy for real?

    Having been banned from holding any significant function position within the industry, he then sets up a Compliance Consultancy. You really couldnt make it up.

    Imagine getting an FCA visit, or telling your PI insurers you outsource compliance support to this firm.

    Unbelievable

  2. Whilst I have sympathy in terms of lack of clear guidance from the regulator, if you cannot sell 25,000 contracts a year without 2% of them being mis-sold, try a model where you sell a lower amount but have a target of zero mis-selling. Our firm pays for the cost of giving advice up front by way of 100% compliance file checks, pre-approval of advice in contentious areas and proper monitoring of advisers. There is a known cost to this in terms of extra resourcing of compliance staff. If a firm chooses not to pay for this up-front, it is almost inevitable that they will pay at the back end by way of complaints for mis-selling, the cost of which is unknown, but has the potential to far outweigh the cost of doing the job properly at outset!

  3. Nigel Baxendale 16th June 2016 at 1:17 pm

    Anyone who takes advice from a person who, when running his network, published ‘newsletters’ which contained profanity, boasted about their ‘light touch’ to compliance and ridiculed the regulator, needs to have a hard look at themselves. If Charlie Palmer is unfit to hold an Approved Person position in the industry, how on earth can he be considered fit to advise others or run a business operating in this field?

  4. Trevor Harrington 16th June 2016 at 1:36 pm

    Whilst questioning Financial Ltd and the scenario around their purchase by Tavistock, should the regulator also be questioning Tavistock more closely, whilst also looking at their own function in the matter, after all, they are the Regulators who granted the take-over permissions.

    I have another client case concerning the FSA granting permission for Tavistock to take over another IFA, who was allowed to leave the complaints liability in the target take-over company, whilst walking off with all their staff, and clients, and the trail commissions which were attached.

    The target take-over IFA moved it’s staff and clients to Tavistock, with the Regulator’s permission, and promptly threw itself into administration. The complaints, my own client’s included, then fell into the FSCS.

    Why and how did the Regulator come to allow such blatant “phoenixing”?

    • Spot on. I was told by Financial Ltd management last year that run off cover wasn’t necessary as the FSCS would be picking up the tab once Financial Ltd was liquidated. This was in Tavistock’s plan from the outset and presumable discussed up front with the FCA prior to approval of the takeover.

  5. Disgusting. Echoes of Trevor Deaves and Roger Levitt. How he ever passed the regulatory hurdles in the first place is another failure of the regulatory process.

    Unfortunately the ‘pile it high and add margin for redress’ was very much the bank model for financial advice. Make sufficient profit on the 49 cases, then the one in fifty still works out in your favour. At least the regulator did catch up with him in the end.

    A compliance consultant? You cannot be serious.

  6. Julian Stevens 16th June 2016 at 2:44 pm

    Trevor Harrington ~ The answer to your question is that, according to the FCA, “it’s very difficult to prevent”. Quite why this should be it hasn’t deigned to explain. Perhaps a more honest response would have been to admit that “umm, we’re not very good at that kind of stuff”.

  7. To talk in terms of percentages of misselling is to ignore the misery caused and shows contempt for your clients.

  8. Clearly, no one can guarantee nothing will ever be mis sold, even with compliance checking of all cases.

    That said, 2 per cent seems a very low hurdle to jump.

    The objective must always be zero mis sells.

  9. Impossible to have zero misselling. Why? 2 reasons. 1 because there will always be a tiny minority of rogues out there (as there are in all types of business) and 2 Because the FOS when basing their decision on a case, apparently does so based what the complainant says and what the IFA documents. If they find for the complainant then by definition they were missold. However as we often hear from reports it is the fact that there was not enough evidence on the file to come to side with the adviser. It is therefore not a case of misselling but miss-documenting or not clear enough documenting from the adviser, according to the adjucator/ombudsman. It will be ludicrous to aim for zero misselling as it will never be achieved.

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