View more on these topics

Nic Cicutti: Too late for a Capita fightback?

Nic-Cicutti-MM-blog.jpg

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 nic@inspiredmoney.co.uk

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. This is one of the few articles written b y Nic C I actually agree with. If he stuck to writing ones like this, whilst he might get less comment, he might get more respect from the IFA community a large proportion of whom think he is like a “shock jock!

  2. Cap'n Birdseye 4th April 2013 at 9:28 am

    Shame you didn’t accord the same applause when Adviser Alliance took on the FOS over the 15 year longstop.

  3. @ Cap’n birds eye
    this is promotion for ifa centre, whilst having a dig at others.
    Typical.

  4. @ Anon 9.42 You have jumped to a conclusion as you post at Cap’n be who comments on adviser Alliance and then mention IFA Centre. Not sure where you are going with this?
    A LOT of those caught up in the Arch Cru debacle(if they are still trading) are likely to be restricted advisers now, so actually IFA Cantre is fighting for both IFAs and Resticted on this issue while APFA appears to have given up….
    That’s not having a go at APFA and I may rejoin next year and remain a member of IFA Centre too as both have a place I feel.

  5. Nic

    As far as I am aware, the ONLY ‘trade’ Assoc to have ever got legal during the ‘reign of the FSA was Adviser Alliance.

    Putting aside all the posing and posturing and ‘fine words’ issued by all the others ?? says it all really !

    I just hope those that take on the legal battle actually understand the issues they are fighting for and don’t just talk a good game like so many others (dare I say including you Nic) !

  6. @ Phil
    I was not having a go at Birds eye.
    Nic appeared to be promoting IFA centre at the expense of others, which is his way of picking a fight or attempting to stir things up between us.
    I actually agree wholeheartedly with the captain.
    Apologies if things seemed to come across otherwise.

  7. I did not ask Nic to write this piece : I sent him the same press release as I sent to a variety of trade and consumer journalists. The action has been mentioned in the Times, covered in the Sunday Times, written about by Jeff Prestridge and now Nic.
    There is no need for anyone to have a go at anyone else : we have found lawyers prepared to put a case together on behalf of investors who wish to pursue Capita Financial Managers for their losses. For the number of investors not covered by the redress scheme (at least 20% of the sums invested came from Insinger de Beaufort investors who are ignored) and for those whose advisers have gone out of business and who will be stuck with FSCS limits, for those who will be stuck with FOS limits – and let’s not forget those who were given suitable advice (even if you use the FSA’s somewhat flawed parameters) …
    PLUS every single IFA is affected by this – even if you did not advise on these funds you will end up paying for this – there are significant numbers of advisers already departed with claims going to fall on FSCS. There are significant numbers of advisers with no PI cover who will go out of business with liabilities for Arch cru and probably more besides falling on FSCS.
    And you know who will end up paying FSCS levies.
    Instead of “doing a people’s front of Judea” about who did what about the long stop or anything else for that matter, why not focus on the bigger picture and make sure all advisers and all clients know about this action and support it.
    Finally, I have nothing to gain from this myself – a few firms have joined IFA Centre specifically because of my efforts on Arch cru – but if Nic has decided to mention the action then it’s because he sees some point in mentioning it.

  8. I just cannot believe that contributors can be so blind. Adviser Alliance was fighting for their own benefit exclusively. What the IFAC is doing is fighting for the benefit of clients as well as the IFA community whose interests in this respect are aligned. The long stop does not align those interests.

    If a journalist sees a good point I don’t see why you feel that is promoting one trade body over another. If it’s right it’s right and if it is self-centred it won’t get much praise. That is the difference.

  9. As an asset management professional of over 30 years, who has been advising investors in Arch Cru for some three years, I despair at the bickering within the IFA industry which is characterised by some of today’s comments. Like it or not, one of the prime reasons there has been so little progress in a case where the blame and responsibilities for Arch Cru are blindingly obvious, is the shambolic lack of organisation within the IFA industry. For that reason alone, Gillian Cardy ( whom I neither knew nor had met until two months ago) deserves every credit for taking up the cudgels, bringing in the appropriate professional and legal skills and battling to get IFAs behind the case driven by Harcus Sinclair. I simply do not understand why this is an issue as all we are asking is for IFAs to put their Arch Cru investors in touch with Harcus Sinclair. There is no up front cost, there is no intention to use this contact to attack IFAs and this is almost certainly the last/ only chance of both investors and IFAs getting the result they deserve. Is that really so difficult and so what if the IFA Centre gains more members? Good luck to Gillian;she deserves it.

    Just to explain the legal situation in brief, the case involves deep analysis of the structures and regulations and must be driven by investors who have suffered loss, directly or indirectly from Arch Cru. This is why previous legal efforts have failed on one or both counts. We already have much detailed analysis of the structures and regulations and the indications are that the case is powerful. We already have substantial interest from investors but need to build the investor base further. I must dispute Nic Cicutti’s comment that there are not enough investors outside the S404 scheme. There are, and many are already in contact with Harcus Sinclair.

    All IFAs with Arch Cru investors need to do therefore is put those investors in touch with Harcus Sinclair. All it costs is some administration time.

  10. Harry, you may have finally lost it.

    Adviser Alliance was fighting for the industry. A matter ignored by AIFA under successive leaders at a time when you were on the council.

    The lack of a longstop potentially affects every adviser – tied, independent or whatever.

    Nic’s usual tactic of having a sly dig has got some excited but see it for what it is.

  11. @Alan

    I really don’t think I have lost it at all. For someone who is usually perspicacious you have entirely missed the point. The long stop has nothing to do with any advantage to clients – Indeed potentially to the contrary, otherwise why is the Regulator so obdurate on the topic?

    What Gill and the IFAC is doing is very much to the potential advantage to clients and may well be of help to advisers into the bargain.

    As far as Nic is concerned, perhaps you might like to see the other ‘Pink’. Jeff Prestridge is also complementary. There are too many that really ‘don’t get it’. Nic is a professional journalist. It is not his job to massage the egos of advisers. I may not always agree with everything he says, but it makes me think and perhaps has something to teach me. Very often he is spot on; sometimes he is way off target, but hey! The only guy that’s infallible is the bloke wot lives in the Vatican.

    Anyway being able to ‘take it on the chin’ is character building.

  12. Even if Nic has had a little dig in his very last sentence, can’t you let that go and make sure that as many as possible support this action??
    Who knows?? If we can win this because we actually got it together and stood united behind this issue where everyone’s interests are absolutely aligned, then maybe we would all be taken more seriously next time …

  13. For my part, I support any action from a ‘trade’ Association fighting utter stupidity from regulators that adversely affects this industry and those working within it. The point I was making was simply that none BAR Adviser Alliance had ever done so previously.

    I and Alan Lakey were closely involved in the Adviser Alliance and I passionately believe that this industry is sunk without PROPER representation – representation that has been sadly lacking from the likes of AIFA/Cummings et al – oh yes if words were actions AIFA would be held up as the saviour of all – actions speak louder than words – I wish IFAC very well indeed !!

    By the way, the point I made about talking a good game was levied directly at AIFA and their like who when push came to shove didn’t even understand the issues let alone how to fight them legally or otherwise Cummings, Goddard and the Council was in fact hilarious – the jury is out on APFA although in Alan and Neil Liversidge at least we have 2 Council members who understand completely the issues.

    Gill Cardy make sure you get the best LONDON barrister you can don’t accept some Provincial Numptie who also talks a good game.

    Finally, Harry ‘aitch’, occasionally you come out with something sensible but on this one you are a silly old self righteous sausage old son !

  14. @ Harry Katz
    “Nic is a professional journalist”
    Sorry Harry now we know…. you really have lost the plot.

  15. OK Guys from now on I will sign myself ‘The Dribbler’.

    Is that OK?

  16. I do like Harry and Derek’s posts, I don’t always agree with them (altough I do a lot of the time), but they are always worth a read.
    Have a good weekend chaps…. off to the beach soon, lovely waves.

  17. “At a time when other trade bodies take people’s money and offer little in return”
    Which trade bodies do you mean nic?
    “Personally, I think the fight should have been joined 12 months ago or even longer. Today, it looks doomed”
    So why bother to write about it?
    Was it really just to start an argument between advisers over IFA centre & those other “trade bodies”?
    Thought so. You did it again Nic and as usual everyoine fell for it. You should buy a big wooden spoon.

Leave a comment