Two independent directors of the Personal Finance Society have quit the board and will fight to try and block the potential transfer of £19m in PFS reserves to the CII.

The two, Vanessa Barnes and Gordon Wilson, cite “significant concerns” about the independence of the PFS following a move late last year by the Chartered Insurance Institute to take full control of the its subsidiary.

The PFS and CII have been at loggerheads since last year on the future direction of the PFS, the 40,000 member professional body which provides the Chartered Financial Planning designation.

Ms Barnes and Mr Wilson have served as PFS non-executive directors for 11 years.

They say they have “deep misgivings” over the future of the PFS’s £19m cash reserves if steps are taken to wind it up.

They plan to propose a motion to the forthcoming PFS annual general meeting in September to block the CII or another entity from gaining control of the funds.

The motion will instead propose that, in the event the PFS is wound up, its reserves will be distributed among its members, who would each receive around £500.

Both say that while the PFS is a subsidiary of the CII Group, its independent board members have a duty to act in line with the objectives of the PFS – to facilitate the promotion of financial advice. They add that at no time in its history has the CII previously held a majority position on the PFS board, as it does now.

The CII has said there have been several governance failures at the PFS which has committed to investigate the complaints.

Ms Barnes, who founded her Financial Planning business in 1996 and has served on the PFS board for six years, said: "The 40,000 members of the PFS should be aware that, according to the Society’s articles, if steps are taken to wind it up - for example to subsume it into another organisation - the entire £19m can be transferred into another entity, rather than going back to the members, whose hard work and fees have built up the reserves over many years.

“It is well known that the CII’s financial position has deteriorated significantly in recent years, and many PFS members have expressed deep misgivings to us about what will happen to the Society’s reserves if steps are ever taken to wind up the organisation.

"The steady erosion of CII reserves from £38m in 2016, together with a £21m cash injection from the sale of its former headquarters building, demonstrate a significant lack of financial management which the Institute seeks to blame on Covid-19 or the still-undischarged costs of the defined benefits scheme.

“It is clear that the CII now has de facto control of the PFS board, having nominated its own representatives over recent months, combined with the subsequent departures of long-standing and highly-respected figures in our industry.

“With this in mind, we will be submitting a formal motion to the Society’s AGM in September, giving members the opportunity to change the articles to ensure that, if proposals are ever brought forward by the board to wind up the Society, all available funds will be transferred back to the members themselves, rather than being handed to a successor body.

“If there is no intention to get control of the £19m, I can see no reason whatsoever why any PFS board member would object to that proposal, but it will be very interesting to see the response to what should be a simple and straightforward vote.”

Mr Wilson said: “Vanessa and I are both deeply disappointed at having to step down, but we feel we’ve been left with no choice.

“We both joined the board as volunteer, non-executive directors because we had deep respect and admiration for the work of the PFS, and because we wanted to give something back to the profession. The PFS has helped us greatly in our careers and in the growth of our businesses and we share the values of professionalism, integrity and trust.

“Over the past year, the CII has worked assiduously to gain effective control of the PFS and it has now manifestly achieved that ambition. We have fought hard on behalf of the PFS and its members, but the CII is now firmly in control and the PFS has lost its position as the voice of our profession.

"The latest member consultation results made it crystal clear what the PFS members want but neither the CII-controlled PFS Board nor the CII has embraced or acted upon it. Instead, the members’ wishes have been ignored because the CII doesn’t like any of the conclusions.”

The PFS and CII today issued a joint statement about the resignations.

Joint statement from Alan Vallance, chief executive of the CII Group and Don MacIntyre, interim CEO of the PFS: “The PFS Board has today accepted the resignations of Vanessa Barnes and Gordon Wilson and we thank them for their service over many years.

"The remaining members of the PFS Board met today to approve the appointment of new interim Member Directors, pending the outcome of a formal recruitment process that will begin immediately.

"Their appointment will ensure that the PFS Board can meet in quoracy and immediately resume serving our PFS members, including investing the PFS reserves in ways which best serve PFS member interest, including compliance with meeting the FCA’s Consumer Duty regulations.

"As has been repeatedly stated over the past 12 months, there is no intention or value in deregistering the PFS. Ensuring good governance is in place across the Group has always been our priority, and the CII will continue to support the actions the PFS Board considers necessary to ensure compliance with corporate governance best practice. We look forward to the PFS Board now channelling all its energy and resources into building a strong future for PFS members.”