The collapse of Tenet has left nearly 10,000 customers in financial limbo, raising pressing questions about the effectiveness of consumer protection in the UK’s financial services industry. These individuals, who trusted a Financial Conduct Authority (FCA) registered firm and its advisers, now face a sobering reality: they’re left to rely on the Financial Services Compensation Scheme (FSCS) for justice—with no guarantees that their losses will be fully recovered. This situation highlights systemic flaws that call for urgent reform.
What Happened to Tenet’s Customers?
When Tenet collapsed earlier this year, administrators revealed a troubling picture: over 9,500 clients were identified as being at high risk of having received unsuitable advice. Many were advised on defined benefit (DB) pension transfers—a notoriously complex area requiring the utmost care. Others paid ongoing fees for services they never received.
The real twist? Tenet’s directors, advisers, and shareholders seem to have walked away unscathed. Directors’ salaries, dividends, and bonuses remain untouched, while advisers who earned commissions or ongoing fees from selling questionable products face no accountability. Meanwhile, major shareholders, including big names like Aviva, Aegon, and Abrdn, declined to step in when liabilities emerged, leaving the FSCS to pick up the pieces.
Who Pays When Firms Fail?
The FSCS exists as a lifeboat for consumers caught in such storms. While this offers some solace, there’s a catch: payouts are capped at £85,000 per claim, which may not cover significant losses, particularly for DB pension transfers. Worse still, the FSCS is funded by levies on ‘good’ financial firms—which, in reality, means the costs are indirectly passed on to consumers through higher fees.
In essence, innocent clients of responsible firms end up footing the bill for the failings of others. Where is the justice in that?
What’s Wrong with the System?
This situation exposes systemic cracks in the UK’s financial services framework. Consumers are encouraged to trust FCA registration as a badge of honour. Yet when things go wrong, this trust often proves misplaced. Firms can collapse, leaving liabilities behind, and the safety nets in place—like the FSCS—have limits that leave many without full redress.
Meanwhile, directors and advisers escape serious consequences. This lack of accountability undermines consumer trust and tarnishes the reputation of the industry as a whole. It also raises a critical question: why are we pretending the system works when the outcomes tell a different story?
What Can Be Done?
Reform is essential to restore faith in financial services. Here are some steps that could make a real difference:
- Stronger Accountability for Directors and Advisers: Directors and advisers who profit from misconduct must be held to account, facing fines or restrictions that reflect the damage caused.
- Higher FSCS Limits: The £85,000 cap needs to be revisited, particularly for complex cases like DB pension transfers, where losses can far exceed this amount.
- Improved Oversight of FCA Registered Firms: FCA registration should be more than a badge; it should guarantee robust oversight to prevent firms from failing clients in the first place.
- Fairer Funding for FSCS: The FCA’s proposed “polluter pays” model aims to address this issue by ensuring that firms responsible for causing consumer harm bear the financial burden of redress. This approach would shift the costs away from responsible firms and their clients, creating a fairer and more sustainable system.
A Call for Transparency and Action
At the Academy of Life Planning, we believe in empowering individuals with knowledge and tools to take control of their financial futures. The Tenet collapse is a stark reminder of why it’s essential to question and understand the systems that underpin financial advice.
If you’ve been affected or want to learn how to better protect yourself, we’re here to help. Our goal is to demystify the financial landscape, ensuring that you’re equipped to make informed decisions and avoid falling victim to systemic failings.
It’s time to demand a fairer, more transparent system that works for everyone—not just those at the top. Join the conversation, share your experiences, and let’s push for meaningful change together. Justice for consumers isn’t just necessary; it’s overdue.
Academy of Life Planning 