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Skipton advice arm sets aside £5.6m for refunds and redress

The financial advice division of Skipton Building Society has set aside a total of £5.6m for commission rebates for fund underperformance and customer redress relating to a past business review.

In a statement published yesterday ahead of its full year results next month, Skipton reported that its financial advice division, which covers investment, protection and mortgage advice, posted a pre-tax loss of £900,000 in 2012, compared with a pre-tax profit of £2.9m in 2011.

The division, which incorporates Skipton’s investment advice arm Skipton Financial Services, incurred charges of £3.3m in 2012 for commission rebates.

Under its “Monitored Informed Investing” proposition, Skipton Financial Services offers customers a rebate on ongoing charges if a fund underperforms against its peers.

If a fund returns a fourth quartile performance over a year, ongoing charges will be refunded. The rebate 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.

Over the past year rebates have been triggered by funds such as Thames River Distribution, Jupiter Merlin Growth and Jupiter Merlin Worldwide.

Skipton’s financial advice division has also increased provisions from £1.8m to £2.3m to compensate customers following a past business review. The company says the provision relates to issues with its “documentation of advice”, though Skipton says it was not involved in the FSA’s assessing suitability review or its recent mystery shopping review into bank advice.

Overall Skipton Building Society has posted a pre-tax profit of £36.4m for 2012, up 64 per cent from £22.2m in 2011.

A spokeswoman for Skipton says: “Skipton Financial Services has a unique proposition in MII and, because the promises it makes are of genuine value to customers, they can result in significant cost to the business.

“Nevertheless, Skipton Financial Services remains committed to offering MII despite this, and to providing financial advice to typical building society customers with £10,000 or more to invest.

“At a time when reliable financial advice is at a premium, Skipton Financial Services will continue to put its customers first in this way.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. However, they take a very long time in making the decision to move the fund into another. All the while the poor client is still losing money from their investment.

  2. This MII scheme is most odd because no firm or even manager can continually pick [or be] winners especially in the active space and over such a short period of time.That is unless they have a crystal ball and if so, where did they get it as I’d like one.

    I don’t know how the scheme works but do they charge double the following year if a fund moves from 4th back to a higher quartile?

  3. It’s great to see that Skipton BS customers still have a dependable source of financial advice even where they have a fairly small (by today’s standards) amout to invest.

  4. I echo Duncan Carter’s first paragraph. I wonder how long the society will continue with the policy of charge rebates for underperformance? Is the idea a marketing proposition or an investment proposition?

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