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Skipton advice arm sets aside £12m following investment advice review

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Skipton Building Society’s advice businesses have made a combined £12m provision for customer redress relating to an investment advice past business review.

In February, Skipton revealed it would set aside £5.6m to cover both redress and commission rebates to investors for fund underperformance.

Some £3.3m of this related to funds under its “Monitored Informed Investing” proposition, whereby customers are offered a rebate on ongoing charges if a fund underperforms against its peers.

Skipton says the remaining £2.3m provision followed a past business review which focused on the documentation of investment advice at SFS and its other advice subsidiaries.

This was a net provision, however, meaning it only set out the difference between the amount Skipton expects its professional indemnity insurer to pay out and the estimated size of the total complaints provision.

The full SFS accounts, published on Companies House last week, reveal the firm has made a £9.1m provision relating to the investment advice review. Of the £9.1m, SFS estimates £7.8m will be covered by its professional indemnity insurance.

However, a Skipton spokeswoman says the total provision across SFS and the building society’s other advice subsidiaries is £12m.

She says the “majority” of the £12m is covered by Skipton’s PI insurance.

A statement in the SFS 2012 accounts says: “Included within the investment advice provision is a gross provision of £9,149k (2011 nil) relating to a past business review.

“Provisions in relation to past business reviews are determined using a risk based approach to identify the potential population of clients impacted by the review.

“Compensation payments are estimated based upon historic levels of compensation or management’s best estimate of the likely settlement per case.”

The firm’s accounts also reveal a pre-tax loss of £1.26m for the year to 31 December 2012, compared with a profit of £2.85m in 2011.

In July, SFS posted pre-tax profit of £500,000 for the first six months of 2013, compared with a £500,000 loss in the corresponding period during 2012.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. What is this skipton financial services

    Takes commission off client money on mass then takes money off its insurers to pay back to clients!

    Profits miniscule

    Follow the rest of the high street sfs and hang your boots up

  2. £7m+ covered by PI. Thanks guys my premiums up again.

    I long ago came to the conclusion that only owner operated firms are sufficiently invested in the future of their businesses to actively avoid silly advice liabilities.

    All the big boys seem to try & find some clever way of doing things which seem invariably to fail.

    Vanilla investments may not be very sexy but they are reasonably predictable and, properly distributed and documented, hard to complain against.

  3. under-performance fees; are they mad or did they just forget where the crystal ball was stored?

    what a crazy business model!

  4. And the Treasury rub their hands together with glee………

  5. Hampshire Yokel 29th August 2013 at 5:22 am

    “Skipton Building Society is a mutual organisation, which means we are owned by our members and believe in placing them at the heart of everything we do. We are run by a board of directors who are responsible for deciding our strategy. They act as trustees, safeguarding Skipton’s assets so that we can continue to offer our members peace of mind, combined with outstanding products and a standard of personal service which is second-to-none.”

    So, in spite of being owned by its customers, it has been conducting its affairs poorly.

    A cynic might offer up interesting views of a mutual society using PI insurance to provide guarantees to customers for investments that should not have guarantees.

    As Simon Webster has suggested, the impact of this could be felt by the rest of the industry.

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