An Isle of Man employment tribunal decision to award compensation for wrongful dismissal to an adviser triggered a lengthy debate during the hearing about what is a reasonable amount to pay for lost future earnings.
The recent tribunal of Robert Sutton vs Creechurch Capital, which awarded Sutton compensation for wrongful dismissal, went into some detail on this contentious issue to determine the right level of payment.
77-page tribunal decision
The employment tribunal decision document recording the debate was posted on the official Isle of Man website on 9 August but then removed soon afterwards at the request of one of the parties involved.
International Adviser, however, has obtained a copy. It runs 77 pages and seeks to breakdown what is fair to pay Sutton for wrongful dismissal.
Sutton was a portfolio manager at Isle of Man-based boutique investment house Creechurch between January 2013 and February 2016.
He handed in his notice in January 2016 as he had accepted a new job as an IFA with St James’s Place in Shanghai. However, on what should have been his final day in the office, Sutton was sacked for gross misconduct.
He appealed to the employment tribunal claiming he was dismissed for discussing concerns about the company to the Isle of Man regulator, while Creechurch stated he was sacked for gross misconduct for using messaging app WhatsApp to contact clients.
The employment tribunal found unanimously in Sutton’s favour and awarded him compensation of £685,339.88 ($874,750, €764,596).
Getting down to brass tacks
The document reveals how contentious the issue of compensation was, with Creechurch setting a bar of £1,000, while Sutton was looking for around £900,000.
Sutton was unable to take the job with SJP and found it extremely difficult to find other work due to the “gross misconduct” charge.
The £900,000 sum was based on calculations that he would have been earning substantially more with SJP.
Creechurch’s representatives claimed that Sutton’s lack of sales experience meant he would likely not have been successful in his new job.
Sutton countered that his role at SJP would have been to secure business by winning the trust and confidence of expats for the quality of his advice and not from selling like a used-car salesman.
He further stated that, had he been able to start working with SJP in April 2016 as intended, he “would have caught the rising tide of new business following the UK Government’s introduction of pension freedoms in 2015”.
Sutton told the tribunal that “the years following the introduction of pension freedoms were, without doubt, the most fertile that the financial advice arena had seen since I began my career”.
Using Guardian Wealth for comparison
Given SJP’s position in the industry, Sutton stated that he could not point to an equivalent role to support his compensation claim.
However, when was had been looking for work in April 2016, Sutton had prepared a business plan for working with another advice firm, Guardian Wealth.
His evidence to the tribunal was the average earnings for advisers at Guardian in 2016 was £183,000, rising from £166,700 in 2015.
He did not state if these figures were across the whole company or for specific regions, as Guardian operates in the UK, Switzerland and the UAE.
The top performing adviser reportedly made £502,000 in 2015 and just over £565,000 in 2016 – after tax.
Two other advisers each made over £450,000 in 2016.
International Adviser contacted Guardian Wealth to verify the figures, but no response was received prior to publication.
In addition to loss of earnings, the tribunal awarded other compensation, including the sum Sutton could have secured by selling his business to SJP after four years.
A full breakdown of the compensation awarded to Sutton is below:
A spokesperson for Creechurch confirmed to IA on 16 August that the company will be appealing the decision.