Advice firm structure raises questions after steelworker complaints hit subsidiary business

Hannah Godfrey reports...

The structure of a Swansea advice firm has been called into question after pension transfer claims were made against its subsidiary that would leave the parent unscathed should the subsidiary become insolvent.

Welsh firm AW Dallas Financial Services – which trades as Portfolio Pension Consultancy – is facing seven claims relating to pension transfer advice it gave to steelworkers.

AW Dallas is a subsidiary of Portfolio Financial Consultancy. According to Companies House, on 27 June 2017, Christian Roche and Gareth Jones, who are directors at Portfolio Financial Consultancy, became directors at AW Dallas.

According to the Financial Services Register, AW Dallas operates from the same address as Portfolio Financial Consultancy and has the same website. The two are, however, separate legal entities.

‘Parent company unscathed’

Clarke Willmott solicitor Philippa Hann, who is dealing with claims against the firm and others that advised steelworkers to transfer out of their defined benefit pensions, said while the corporate structure of Portfolio Financial Consultancy was not illegal, it did raise concerns that such a structure did not promote best customer outcomes and could spread costs onto the wider advice industry.

“If the claims against Portfolio Pension Consultancy – aka AW Dallas – are successful and it doesn’t have sufficient or any insurance to cover those, effectively that company will go into insolvency and the parent company will remain unscathed,” Hann explained. “To coin a phrase of somebody else’s – the profits will have been privatised and the losses will have been nationalised.”

She continued: “When you look at the Financial Conduct Authority’s own business plan for 2019/20, it puts corporate governance and culture front-and-centre of what is important to it – and I cannot think of a better example of exactly how a company should not be set up in order to preserve the protection of the consumers.

“I don’t know how many other companies have a wholly-owned subsidiary or a separate legal entity through which they put specific business and there is a risk there will not be enough insurance if these claims are successful. In those circumstances the company will enter into an insolvency event and the rest of the industry would yet again be asked to pick up the bill.”

Portfolio Financial Consultancy recently bought the client bank of embattled adviser firm Crescent Financial, which RP’s sister publication PA first reported lost its regulatory permissions in May.

‘We’re well-funded’

Responding to Hann’s concerns, Portfolio Financial Consultancy director Gareth Jones explained the firm used AW Dallas to carry out pension transfers because it was the part of the business that held pension transfer permissions.

“Portfolio Financial Consultancy does not have pension transfer permissions,” Jones continued. “We were in the process of applying for pension transfer permissions, but for expediency – in the fact that we did acquire a company with those permissions in place -we then had the necessary permission we required. Therefore, there wasn’t a perceived need to expand it.”

Jones denied having several “formal” complaints made against the firm, though admitted it had received notifications of legal action from Hann’s firm.

Asked if AW Dallas had insurance in place to handle the complaints, Jones said: “Suffice to say we’re well-funded and we meet all of our regulatory threshold requirements. I think that’s all that needs to be said in that regard.”