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Skipton advice arm returns to profit but refunds further £1m in charges

Skipton Building Society’s financial advice arm returned to profit in 2013, but set aside a further £1m related to charges refunds.

The annual results, published earlier this week, show its three advice firms Skipton Financial Services, Pearson Jones and Torquil Clark made a pre-tax profit of £3.9m last year. This compares to a loss of £900,000 for 2012.

The results also show Skipton Financial Services set aside £1m last year under its “Monitored Informed Investing” proposition, whereby Skipton Financial Services customers are offered a refund of ongoing charges if a fund underperforms against its peers. Customers also receive a refund of initial advice charges where an investor dies within three years of investing, which is passed on to next of kin or charity.

On fund underperformance, if a fund returns a fourth quartile performance over a year, ongoing charges will be refunded. The refund continues to be paid while the fund remains in the fourth quartile.

Customers are contacted with an alternative investment option if Skipton Financial Services believes the fund’s underperformance is likely to continue over the longer term.

In 2012 Skipton set aside £3.3m under this proposition, as well as a further £9.1m for customer redress relating to an investment advice past business review for Skipton Financial Services.

Skipton says the actual cost of the review and any redress was £241,000, as the £9.1m was a “prudent worst case scenario”.

In 2012, Pearson Jones made a £5.1m redress provision for a past business review and other redress.

Skipton declined to comment on any advice redress set aside in 2013.

Torquil Clark managing director John Chapman says the firm has set aside no redress for 2012 or 2013. 

Overall, Skipton Building Society reported a pre-tax profit of £102.5m for 2013, an increase of 190 per cent on the £35.4m pre-tax profit it made in 2012.

Its gross mortgage lending increased by 63 per cent year-on-year, from £1.5bn in 2012 to £2.4bn in 2013.

A spokeswoman for Skipton says: “These underperformance rebate and death rebate promises are part of SFS’ ongoing service proposition to help investors and are extremely well received by clients.”

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