North East wealth management firm True Potential has set aside £100m to compensate clients that could have been negatively impacted by the transfer of their investments.
The Tyneside wealthtech business is also the subject of a Financial Conduct Authority review known as a section 166, led by an expert third party. True Potential has made the huge sum available for clients who were transferred to its platform and funds in deals struck with independent financial advisers who were offered up to a reported 8% of client assets.
Boss of True Potential's wealth management division, Steve Hutton, said the firm had not always given clients adequate information about the movement of their investments to the Newburn-based business. True Potential had used the mechanism, known as direct offers, to encourage independent financial advisers to bring their clients to its platform.
Under the arrangement, advisers at an authorised advice firm joined True Potential and their clients were offered to transfer into the group's funds. The Financial Ombudsman Service - which can settle complaints between consumers and businesses - has previously ruled that one such transfer case constituted advice, despite True Potential claiming otherwise, and said the move had been to the client's detriment.
It has been reported that True Potential will contact clients and offer the compensation where they have suffered a financial loss because of a transfer.
Steve Hutton, chief executive officer of True Potential Wealth Management, said: “It’s clear from this review that we did not always live up to the high standards that we set ourselves, in that we didn’t always give clients adequate information about their transfer to True Potential when they were moving their investments to the business.
“We have acted quickly to make appropriate changes to our transfer process, including implementing enhanced disclosures for clients and refining our approach to onboarding new advisers. These changes have been designed to fully align with the FCA’s Consumer Duty and the regulator’s focus on suitability across the wealth management industry.
“As our business evolves under the leadership of our new CEO, Gerry Mallon, we will continue to evaluate our onboarding and servicing processes to ensure that we maintain our focus on delivering the best outcomes for our clients.”
Last October, True Potential announced that former chief executive of Tesco Bank, Mr Mallon, would take over from Daniel Harrison, who co-founded the business with his father in 2007. The move came several years after the Newcastle business sold a majority stake to private equity firm Cinven, in a deal that reportedly valued it at £2.5bn.
True Potential has experienced fast growth in the 18 years since its inception and is now said to have 578,000 clients.
