Anyone wanting to find out more about the relationship between the Financial Services Compensation Scheme (FSCS) and its new complaints handling partner Capita will hear mixed messages.
The lifeboat fund agreed to outsource all of its complaints handling to everyone’s favourite outsourcing business Capita in a contract worth £37 million over an oddly specific 4.75-year term.
This raised eyebrows in the New Model Adviser® office for several reasons. First, Capita has been hurt by the fallout from fellow outsourcer Carillion’s demise, leading to its share price falling significantly in the past year.
Problems were so bad the company launched a £700 million fundraising exercise in April. This arrested the slide in share price and brought some much needed respite to high-profile investors such as Neil Woodford and Mark Barnett.
Capita has not been helped by the extra focus on delivering its many government contracts. Whether it is army recruitment, NHS cancer screening or disability assessments, reports appear almost weekly suggesting the company is not doing well and, in some cases, harming people.
The private sector has not offered any respite. Capita lost its £700 million contract to administer M&G Prudential’s life and pension policies back in January.
The FSCS has picked a company that is being dropped by private companies and criticised heavily for the way it has handled public sector work.
And this is before we come to Capita’s previous dealings with the lifeboat fund itself.
Arch Cru was one of the biggest scandals to hit the advice sector. The funds lost 40% of their values between March and December 2009.
This left investors out of pocket and advisers facing compensation bills that put many out of business, forcing investors to turn to the FSCS. Many of the problems stemmed from the fact the funds were allowed to sit in the cautious managed sector, meaning they were effectively mis-sold.
‘The truth is no one involved in the promotion, distribution and oversight of these funds did anything like enough due diligence,’ wrote former New Model Adviser® editor Gavin Lumsden at the time.
Who was the authorised corporate director of this fund? Capita of course! Such was its involvement, it agreed a redress system for clients, details of which are still on the FSCS website. Capita has since sold its fund management arm, but the name still leaves a bitter taste.
Advisers picked up some of the bill for the FSCS’s Arch Cru payments. Now, nearly a decade after the scandal was uncovered, their levies will go towards paying a company that was integral to the funds’ problems.