PosSol moves to calm partners’ fears of past business review

Jim Reeve, chief executive of national IFA Positive Solutions, this week moved to quell partners’ fears of a company-wide legacy business review he admits will “likely” lead to at least some client redress.

Reeve says he expects fewer than 5% of all cases checked will be marked as “failed” advice, adding in most cases any redress costs will be “relatively small”.

The review, which involves randomly checking completed case files in four product areas, was launched at the beginning of the year to eke out any underlying suitability-of-advice issues in light of recent FSA action against other businesses.

Some partners are concerned the review may cause some clients to suspect poor advice even where none is later identified.

Others have assumed that, where redress is required, it will automatically cost them the maximum £5,000 professional indemnity insurance (PII) excess.

One former, unnamed, partner reportedly said the review was “pulling the company to pieces”.

But Reeve says it will provide protection for partners and clients.

"We have seen the FSA’s thematic reviews throw up issues that have implications for the entire industry,” Reeve says. “I say ‘let us identify if we have any legacy issues and deal with them now’.

“Good governance and compliance are the cornerstones of building a successful business. By doing this now, we will be able to focus our efforts on capturing the growth opportunities emerging in the market after 2012.”

The FSA has taken action against a number of IFA firms for advice failures in recent months, most notably Park Row.

In February this year, it said the national adviser’s parent company, Royal Liver, will likely have to pay customer redress estimated at between £5m and £7.8m.

The past business review at Positive Solutions began at the beginning of 2010 and, Reeve hopes, will be finished by the end of the year.

It involves randomly checking cases in four “sensitive” product areas: pension switching, equity release, investment bonds and structured products, with audit provider KPMG providing compliance support.

Positive Solutions will assess cases in-house before contacting the adviser and, later, the customer, for further information. It says it has yet to complete the full checking process on a single case.

“If we have an unblemished record and we adhere to the highest professional standards, we will have clients who love us,” Reeve says.

“We will have a more successful business, both in terms of attracting clients and high-quality partners, and this is the way to building a fantastic company.”

One unnamed partner says: “When I first heard about the review, I thought it was a spoiling exercise. I could not see the rationale behind it.

“Now I say it is to Positive Solutions’ credit. It demonstrates we are meeting our TCF requirements in the best possible way.”