Rowanmoor  

Rowanmoor racked up 214 Fos claims after Embark deal

Rowanmoor racked up 214 Fos claims after Embark deal
 

The Financial Ombudsman Service received 214 complaints against Rowanmoor between the Lloyds acquisition of Embark and the £1.4bn Sipp business entering administration last week.

Adviser platform Embark used to form part of Rowanmoor, but was separated from the pensions operator when Lloyds bought it for £390mn in July 2021.

The deal was approved by the Financial Conduct Authority in January 2022. 

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After the deal was first announced, 214 complaints were received by the Fos against Rowanmoor.

These will now be handed to the Financial Services Compensation Scheme.

The same month the deal was approved, the Fos upheld a test complaint against Rowanmoor which found it had failed to verify the integrity of an introducer firm it worked with on hundreds of high-risk self-invested personal pension investments.

Some 1,387 of Rowanmoor’s introductions were from CIB Life and Pensions Limited, a firm whose advice led to Rowanmoor clients investing in unregulated overshore schemes, losing them thousands. 

These introductions accounted for 26.9 per cent of Rowanmoor’s business between 2009 and 2013.

The FCA told FTAdviser that before completion of the acquisition by Lloyds, Embark’s board undertook an assessment of potential redress liabilities. It said a provision “close to the upper end” of the calculated range of redress was made into Rowanmoor.

“This provision represented the best estimate of the cost of settling these potential liabilities at the time,” the regulator said.

However Rowanmoor’s board subsequently took further professional advice which concluded the Sipp provider was not able to meet all its future liabilities, leading it to enter administration last week.

The FCA said the provision made by Lloyds and Embark will be used towards potential liabilities.

FTAdviser asked Lloyds how much was set aside to cover these liabilities. The bank declined to comment.

In full-year financial accounts for 2021, published eight months after the Embark deal was first announced, Lloyds said: “Because of the limited time available between the acquisition [of Embark] and the approval of these financial statements, the group is still in the process of establishing the fair value of assets and liabilities acquired.”

Currently, there are 1,013 complaints against Rowanmoor, which have begun transferring over to the Financial Services Compensation Scheme now that Rowanmoor is no longer able to cover all the potential payouts.

This means what is not covered by the provision made by Lloyds and by Rowanmoor to date will be shouldered by the FSCs - including through adviser levies.

The FCA highlighted to FTAdviser that Lloyds' acquisition of Embark was subject to a change in control, and that the deal did not include Rowanmoor which continued to operate as a stand-alone entity.  

“The issues leading to Rowanmoor Personal Pensions Limited’s insolvency are historic, and took place before Rowanmoor was acquired by Embark in 2016,” the regulator said.

ruby.hinchliffe@ft.com