After sale Towergate will retain responsibility and liability for all financial services products sold prior to sale completion
Towergate has sold the IFA arm of the broking group, Towergate Financial Group (TFG), to private equity firm Palatine for £8.64m.
The broker said the group wanted to de-risk itself from any future potential issues that might arise in the IFA sector, following changes to the FCA rules around the transfer of pensions schemes.
The broker revealed in February that it may have to pay compensation of up to £85m for mis-selling financial products through its Towergate Financial division.
The broking group had previously revealed in its 2013 bondholder report that it was working with the FCA on an investigation into Towergate Financial’s sale of enhanced transfer values (ETV) and unregulated collective investment schemes (UCIS).
In a statement today the broker said: “Given the ongoing investigation in relation to past advice provided by the Towergate Financial business on ETV and UCIS it was determined that the group should seek to de-risk itself from any future potential issues that might arise in this sector.
“Under the terms of the agreement all risk on all business written post completion of the sale will be removed.”
Towergate will retain all responsibility and liability for all financial services products sold prior to completion of the transaction.
This covers both ETV and UCIS and any potential future investigations into other product areas sold by TFG prior to the sale to Palatine.
The business, which services more than 40,000 active clients, offers independent financial planning, mortgage broking, corporate employee benefit and protection advice.
It employs 340 people and is based in 12 regional offices. Following the sale, the current management team, led by chief executive Warren Page, will move across to Palatine.
The broker said TFG had also been long identified as a non-core business for the group because of its different operational and risk profile.
The sales process which was launched in late 2013 would have been completed in 2014, but it was put on hold as the broker completed its restructuring programme.
Towergate interim chief executive Scott Egan said: “The sale of TFG is further evidence of a commitment to our core strategic focus, which is to build on our market-leading positions and distribution capabilities in SME insurance and specialist personal lines.
“We look forward to an ongoing and mutually beneficial relationship with the business post sale, as a distributor of complementary products and advice.”
The broking group will retain the Towergate Health+ division which reported into Towergate Financial.
The sale to Palatine is expected to be complete on or before 20 March.