The Financial Services Authority (FSA) has fined Ashcourt Rowan £412,000 over legacy investment suitability issues in its Savoy Investment Management business.
National advice group Ashcourt Rowan has announced the fine in its interim results. Chief executive Jonathan Polin (pictured) said the Savoy business was served with a Section 166 order by the FSA following the regulator’s review of investment suitability across the wealth management sector. He added that the Savoy business was served with a similar order in 2009, but that the business ‘did not implement all the changes that it had committed to as a result.’
Polin said the fine was a ‘significant penalty’ but said it reflected Savoy’s breach of ‘a number of regulatory rules’.
‘We took the decision early on in this process to co-operate fully with the FSA, and resolve this issue at the earliest possible opportunity so that we could move on,’ he said. ‘At the same time we have been very proactive in our approach to rectifying our systems, controls, culture and methodology including voluntarily engaging in a past business review within Savoy which will determine whether any clients need to be compensated.’
Polin added the fine was likely to be the first of a number within the wealth management sector. ‘Savoy is the first firm to be penalised for this but it is in my view highly likely that others will follow,’ he said.
In its final notice the FSA said that the significant systems and compliance failings were identified through a review of 52 files, which 'revealed significant weaknesses across the firm's systems and controls.'
The regulator also found that the firm failed to take 'reasonable care' to ensure suitability of portfolios for discretionary clients and the suitability of its advice to managed clients.
The fine has pushed Ashcourt to a £1.2 million loss before tax for the six months to the end of September, compared to a £1.3 million loss over the same period last year.
A further contributor to that loss was £1.5 million spent on restructuring the company, as part of its change management programme. That has involved picking Cofunds to power its platform proposition and developing an investment model for use across its business, and the introduction of a retail distribution review (RDR)-compliant financial planning proposition. It is also preparing for all the group’s asset management activities to be brought under Ashcourt Rowan Asset Management, and has undertaken a review of governance, risk, compliance and controls arrangements.
The group said the restructuring had succeeded in delivering annualised cuts of £6 million to costs, ahead of its £5.2 million target.
Revenues dropped to £16.1 million, compared to £18.4 million over the same period last year, which Polin attributed to the departure of staff from the business ‘who were unable, in our view, to meet the high bar of ethos, culture and accountability that we require’.
‘This, coupled with difficult trading conditions over the June - August period and the amount of retraining and RDR readiness work that has been undertaken has exacerbated this position,’ he said.
‘Our activity levels since the start of the second half of the year have improved significantly, reverting to more normal levels. I remain confident on the outlook for our performance for the full year.’
Ashcourt has also announced that former Invesco UK chief executive Hugh Ward has been appointed as chairman, replacing Kenneth West.