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Asset manager M&G is taking legal action over Royal London’s takeover of the mutual’s financial advisor platform, saying some of its clients’ pension funds were invested in “inappropriately risky” products before trading. The company claims that it is currently being required by regulators to pay compensation.
In 2020, M&G agreed to acquire Ascentric, a wealth management platform for advisers with £15.5bn of assets under management, as part of a move to expand its share of the personal savings market at the time.
However, in a lawsuit brought to the High Court in London, M&G said that prior to the deal, the business, also known as Investment Funds Direct Limited (IFDL), had “inappropriately high proportions of customers… “I was inappropriately exposed to high-risk investments.” Utilize your pension funds for those investments. ”
M&G is seeking at least £27m in damages and interest from the mutual, alleging that Royal London failed to properly disclose risks during the acquisition process.
M&G said in court documents that prior to the acquisition it offered a product known as CFP bonds on its platform. Some advisors allocated client funds to these bonds as self-invested personal pensions.
The CFB bonds, which had a face value of around £27m, were bought by 553 investors, according to a previously unreported lawsuit filed last month.
M&G claimed in its lawsuit that “no liquid market existed” for the bonds “outside of IFDL’s own platform” and some customers complained they were unable to sell their bonds. The company said the bonds meet the definition of “minibonds,” which are high-risk investments that typically offer high returns, and are subject to regulatory oversight.
According to court documents, one of the customers, who had invested £304,000 of his pension in bonds, complained to IFDL about why the product was allowed to be used on the platform.
Others lodged complaints with the Financial Ombudsman and the Pensions Ombudsman.
In a March ruling cited in the lawsuit, FOS concluded that “had[Acentric]conducted its due diligence in accordance with good industry practices, the CFB bonds were a substandard and speculative investment.” That would be fine.”
One fund manager in particular plans to use the platform to “invest at least 30 percent of all clients’ model portfolios in fixed income, regardless of portfolio type or risk level,” which means “consumption This means that there is a serious risk of harm to the person concerned.”
Royal London has not yet filed a defense in court. Both companies declined to comment on ongoing legal proceedings.
In its court filing, M&G added: “IFDL is actively working with the FCA (Financial Conduct Authority) to set up a relief scheme for all IFDL investors in non-standard assets (including CFB bonds) and to compensate customers.
“Without active engagement with the FCA, there is a significant risk of formal action by the FCA.”
M&G said in its first-half results in September that it plans to exit the advisor digital platform market as part of a plan to “focus and rationalize our wealth strategy”.