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RDR and PI costs hamper Tenon's turnaround

by Alex Steger on Feb 26, 2013 at 07:56

RDR and PI costs hamper Tenon's turnaround

The retail distribution review (RDR) and professional indemnity (PI) insurance costs have hit advisory and accountancy group RSM Tenon, contributing to the firm’s £10 million loss for the second half of 2012.

Tenon enjoyed an improved set of results after its well-documented difficulties with its loss for the last six months of 2012 year falling from £70 million in the second half of 2011, to just £10 million. Earnings also improved to £1.5 million compared to a loss of £8.2 million in the equivalent period in 2011.

However, revenues were down which Tenon blamed on lower business wins in its tax, audit and advisory divisions ‘in part due to the impact of the RDR'.

The company has also had to set aside £1.9 million related to PI expenses for its financial management business.

The results for the second half of 2012 also revealed Tenon was in an ongoing dispute with its PI providers over paying redress to consumers as part of an agreement it made with the Financial Services Authority (FSA) in 2010.

In February 2010 the FSA fined Tenon £700,000 for flaws with its advice on Lehman-backed structured products and ordered it to pay redress to consumers who had been mis-advised.

Tenon said some of its costs related to the FSA settlement were ‘indemnifiable, but that there has been a dispute between the insurers on the programme as to how they should share the indemnity costs’.

It said: ‘A dispute arose between the group and its insurers in the previous financial year as to the extent to which the sums claimed are covered under the programme, and insurers disagree between themselves as to how their liability for those sums should be shared.

‘These disputes were referred to arbitration and the case was heard between 28 January and 1 February 2013 with the arbitration considering all the costs which have been claimed by the group under the PI programme. The decision of the arbitrator had not been delivered at the date of this announcement.’

6 comments so far. Why not have your say?

Arthur Schopenhauer

Feb 26, 2013 at 08:35

ISsthis the much talked about new model??

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alan from perth

Feb 26, 2013 at 09:10

I cant quite fathom this out. Is this a result of a company that simply wasnt ready for RDR or left everything till the last minute. Surely you plan well ahead and look at a full risk analysis. To lose £70 million is quite some going in 6 months

or is it simply a result of the increased workload and paperwork that RDR has generated and this is an unintended consequence. I would love to know how much this whole scenario has cost. surely it could have been done in stages, more efficiently and better thought through ie the consequences of now falling foul of VAT, the archaic contracts with the likes of Aegon where if an "event takes place" all existing payments are stopped so no on going commission and no service to the client.

I cant be the only one but are there other IFA's out there who have to spend over 50% of their working hours wading through paperwork, dictats, latest guidance rules etc etc instead of seeing their clients

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Arthur Schopenhauer

Feb 26, 2013 at 09:19

@Alan Having fathomed out that the rules were ( and still are) in a state of constant change with retrospective consequences the only safe place is not directly regulated and in the HNW space. Preferably not in the UK

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alan from perth

Feb 26, 2013 at 09:31

thanks for the reply, I just seem to be in a constant, never ending circle of fire fighting with insurance companies and their serviice , compliance officers who are fast becoming stalinists and the the never ending regulatory updates

The actual time spent with clients is becoming the minority

Ps Try and get the majority to pay retainers and fees in Scotland?? This is Scotland!!!!

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Duncan Carter 2

Feb 26, 2013 at 10:15

I think this is the RSM Tenon business as a whole [hole?] not just the regulated financial services element.

Still not great if one's an investor

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Feb 26, 2013 at 10:23

I have spoken to a few ex-RSM people. The good guys seem to have walked a while back under what the company over-optimistically calls 'cost cutting'. Since the take-over of Vantis and the other company they have been bleeding cash. But the top level management had to resign as well so they've taken their punishment.

Still, a lot of shareholder value destruction, but I don't think it is particularly linked to RDR - OTHER - than the fact that the good advisers who could have done well under RDR are no longer there.

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