What is business process management? When I carried some research last week, most of what I found on the subject was a load of waffle.
BPM supposedly “provides governance of a business’s process environment to improve agility,” according to one website. In simple words, BPM is about making the way we work more effective.
But in this line of activity it doesn’t pay to be unpretentious, which perhaps explains why Capita Group, a company one or two IFAs may hold opinions about, can dub itself “the UK’s leading provider of business process management and integrated professional support service solutions”.
Capita’s website is big on buzz words and what students of management psychobabble might consider as “statements of the bleedin’ obvious”. For example, it wants people to know that it “grows the business in a controlled and profitable manner across target markets”. Unlike any other company in the UK, then.
More importantly for IFAs reading this column, Capita also tells us: “Deep in the company’s DNA: we respect clients and colleagues, we’re open and honest, we’re quick to acknowledge mistakes and even quicker to correct them.”
Elsewhere, we are told that “[Capita is] committed to growing… in a transparent and accountable way. We act responsibly in all that we do while adding value for our clients, for our stakeholders and for the communities in which we work.”
Which may come as a surprise to financial advisers who faced a massive levy last year partly as a result of failures by Capita Financial Managers, part of the Capita Group, as ACD of the Arch cru funds.
In July 2006, CFM delegated the investment management of the funds to a third party, Arch Financial Products. But it remained responsible for the overall performance of the regulatory obligations in relation to the funds.
We know what happened thereafter: more than 20,000 savers, most of whom were looking for a safe haven for their funds, placed their money into investments that included unquoted companies, private finance initiatives and Greek shipping lines – with predictable consequences.
Yet the FSA itself failed to act, even as alarm bells should have been ringing over at the regulator – for example when Cru Investment Management chairman Jon Maguire and former Arch FP chief investment officer Michael Derks made the astonishing claim on video in 2008 that their funds were “low risk”.
Not only did the FSA absolve itself of responsibility for failing to stop what happened. When in November last year it censured CFM itself, as Arch cru’s ACD, the regulator said this was because the company did not have processes in place to monitor Arch effectively – though it knew Arch had never acted as an investment manager before.
In virtually any situation I have ever come across where a company has been found guilty of such massive failings by the FSA, its findings have inevitably led to massive fines for the business involved, not to mention compensation orders.
Not in this case. In the course of its judgment, the FSA said the decision not to fine the company £4m was because it couldn’t have afforded it. CFM would not have been able to fund both its contribution to the £54m payment scheme agreed in June 2011 and a financial penalty.
Which in turn explained why CFM’s parent Capita Group itself stumped up £32m towards the payment scheme, with HSBC and BNY Mellon paying the rest. The FSA added that CFM spent also spent around £2.8m in its own investigation into the funds and what went wrong.
To add insult to injury, the FSA announced that IFAs may have to pay up to £110m as part of an enforced review into the compliance or otherwise of their sales of Arch cru funds.
Had the FSA decided that HSBC, Capita FM and BNY Mellon Trust & Depositary (UK) were “responsible” for, say, £100m of compensation, IFAs would have paid correspondingly less. But the regulator had already reached an agreement whereby the three would fund a voluntary scheme to pay investors £54m and that left advisers to pick up the rest of the tab.
Last week, the IFA Centre decided to do something about it. The new trade body has sent a letter to advisers, asking them to inform their clients that the possibility of legal action against CFM is afoot and to indicate to the solicitors concerned, Harcus Sinclair, if they are interested in taking part.
The central premise, which both IFAC and Harcus Sinclair would like to test in court, is that CFM is responsible for a much larger slice of the compensation bill than the £32m-odd it coughed up last year.
Personally, I think the fight should have been joined 12 months ago or even longer. Today, it looks doomed: there are not enough investors outside the FSA’s section 404 redress scheme to make an effective stab at fighting CFM, especially given the high acceptances of the deal on offer from those entitled to some compensation.
But I welcome the fact that IFA Centre’s managing director Gill Cardy is having a go. At least she is trying to make Capita live up to the words published on its website. At a time when other trade bodies take people’s money and offer little in return, it’s good to see someone fighting back.
Nic Cicutti can be contacted at email@example.com