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Administrator sells Honister commissions- IFAs must pay to novate

Honister administrator Grant Thornton has sold the firm’s recurring and pipeline commissions to a corporate IFA firm with advisers forced to pay up to 50 per cent of recurring annual commissions to novate their clients to another firm.

Tomorrow Grant Thornton will send a communication to advisers informing them of the offer which sees Burns Anderson advisers forced to pay 53 per cent of recurring annual commissions to move clients to a new firm.

The letter says: “The administrators have sold the commissions to MRP, a specialist corporate IFA company and provided a mechanism whereby the offer group can acquire the ongoing commissions through novations.

“This can only be done where sufficient value is received in the form of an upfront payment to ensure that the overall dividend to non-adviser creditors is maintained.”

Grant Thornton says the percentages are based on the differing levels of claims associated with the Honister subsidiaries.

Sage Financial Services advisers will need to pay 20 per cent of annual recurring commissions, Honister partners will have to pay 7 per cent, B-A Financial advisers 3 per cent and Burns Anderson 53 per cent.

The administrator says this is the first time such an arrangement has been put in place.

Grant Thornton has given advisers a deadline of acceptance and payment of fees of 31 October 2012. The offer is only open to advisers who will be reauthorised by 31 December.

Grant Thornton partner Nigel Morrison says: “This proposal aims to help advisers protect their income stream as in many cases they join other networks.

“Whilst the statutory duty of the administrators to maximise returns to creditors must remain paramount, it has been our intention from the outset of the administration to strike a balance between the position of the advisers and the many other creditors of the group relating to trading liabilities, misselling claims and payroll.

“This is ground breaking and has not been the case in previous insolvencies in the sector.”

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Comments

There are 32 comments at the moment, we would love to hear your opinion too.

  1. How generous of them! Honister advisers are being allowed to buy back their own clients who they introduced to Honister in the first place. Unbelieveable – can’t think of any other industry that could get away with this. So if nobody moves these cients has the Corporate IFA got sufficient resources to service all of the clients of 900 advisers?

  2. Could someone please explain this for me????????? confused or what?

  3. Looks like i’ll be transferring all of my clients individually then. I’m not paying 7% to access my own clients. Seems a good opportunity to move all clients onto an adviser charging basis…..

  4. Groundbreaking ! More like disgusting !

  5. My heart goes out to the Honister advisers, i have been through this myself with the CHG situation and it all smacks of the same type of scenario, close the doors, sell the advisers trail and pipeline to another company and them by the time the advisres get it sorted out (if they ever do) the new owners will have made an absolute killing. When is the regulator going to investigate this practice, it absolutely stinks ! Do your research guys i am sure you will find there is a history of this practice going on over the past few years and all with the same people involved. No names, no pack drill, just do your research.

  6. I am trying to decide which amazes more: that the administrators think they can get do this (and they must have checked the contracts; or that member firms signed contracts that did not specifically mandate novation on severance.

    The administrators clearly do not understand FS. What will/ is happening now is that advisers will transfer the renewal stream on individual plans to new agencies elsewhere as they will not have any clawback liability at the same time loads of plans will be rewritten at the slightest excuse and Hoinster will end up with huge clawback liabilities.

    The words foot and shot come to mind.

  7. That will be interesting – how can you sell something that you don’t have a right to? I suspect lawyers will be kept happy for years. Also sounds like a spectacular due diligence failure by MRP not to understand the nature of what they were buying.

  8. This seems to me to be totally against the spirit if not the letter of any agreements with clients. Clients are paying an ongoing fee to be looked after by their adviser. Do they not have any say in whether they want to now pay MRP for this service?

  9. Reminds me of when Network Data went down owing me over £15,000 in ‘initial commissions’ (all mortgage related). Everyone in the network received their wages in full (but sadly lost their jobs) the administrators did very well thank you very much and we got nothing. With networks the money you bring to their table becomes their’s, even though they only are entitled to the stated share – say 15%. If they go under the administrators don’t just keep the 15% – oh no. I certainly would never consider being a network member again. Broken model if ever there was one.

  10. Well that explains why the administrators refused to bulk novate — Individual Letters of Authority it is then, we set our stall out to that in any event.

    I imagine that clients will now start to receive letters telling them this great news — talk about confusing for them having already been contacted by their IFA!

    Treating Customers Fairly — Cannot quite reconcile how this latest action meets that criteria?

  11. Anyone been on the FSA register to look up MRP yet? Worth a look methinks.

  12. Funny, I thought the client could choose who they want as adviser, and who they wished the trail to go to. If clients change over individually what can the administrators do?

  13. Richard Brydon 31st July 2012 at 5:30 pm

    When IPN went bust the same thing happened, that there would be no novation agreement for the advisers forced to move elsewhere. Individual authorities were the order of the day. Some companies, the Pru in particular, would still not transfer the trail away from the firm that bought the book inspite of the new authority. It’s no fun looking after clients when you know that someone else is being paid for it.

  14. I would like to see whether this is legal, anybody have the contracts and sale documents?

  15. ThIs is the maddest thing I have ever heard! There won’t be much income left to buy in a few months. I think GT have started something they can’t finish surely the FSA has to get involved now? MPR can never service that many clients they have 5 advisers! The FSA role is to protect consumers now is its chance

  16. Neil F Liversidge 31st July 2012 at 6:21 pm

    This must be utterly chilling for all network members. I am so sorry for Honister’s advisers, amongst whom are some good personal friends, all of them honest decent and diligent people.

  17. Tried to look up MRP only came up with 2 listings on the FSA reg both look associated and represent one side mortgage brokers network members and the other SJP. Wonder if it is the same beast? If they are SJP then I wonder how that looks to the FSA given that Grant Thornton are accountants and can only refer to independents so can they sell a client base to a multi tie???

  18. Getting shafted yet again and I cannot believe that these people can get away with this.

    What are the FSA doing to protect us & the clients??

    Why do we pay fees to Organisations and get treated like this.

    Peter Simon smiling all the way to the bank, why has this whole situation not been on the main stream news?

  19. A great deal of cheek from these crooks. They are selling the servicing commission built up over 25 years prior to me joining Honisters to a company that will not service the clients.
    RDR friendly or not?
    Don’t suppose the cretins of Canary Wharf will worry.

  20. As an ex Honister IFA (now reauthorised) I am so tired of being kicked in the teeth. This could be the end of networks (regardless of state). If firms now panic and leave networks will fold. I would suggest all network members at least plan a plan B. the FSA has to act as this sets a dangerous precedence which will not only affect advisers but now clients who won’t get the service. Just unreal

  21. It will be a great surprise if this kind of scenario will not draw the attention of the Regulator. Fingers crossed. Hope someone will help to treat the advisers fairly.

  22. andrew nicolson 31st July 2012 at 9:08 pm

    I am not sure why as a group ex-advisers have not pursued this on a legal basis.

    The advisers have been shafted by the administrators, perhaps some of the management and as mentioned previously a major shareholder.

    Willis Owen was split into a separate company less than 12 months before all of this happened. These shareholders have walked away with a highly profitable business and got rid of all the liabilities by this shrewd move.

    Many of us were of the understanding that the FSA would only agree that the original purchase of Willis Owen was conditional as part of a package that included Honister etc when it was agreed. I am not sure why but the terms asset stripping come to mind. If I were the administrator I know where I would be looking.

  23. ‘Ground breaking’ Helping advisers’ – only an administrator who knows nothing whatsoever about the adviser client relationship could think this was a good thing. The only ground breaking thing here is the utter crassness & stupidity. I hope every single Honister adviser novates individually & the firm who have purchased their clients ends up with nothing

  24. This case is screaming out for legal challenge. When the client took out the business they invested with the provider. The provider pays the trail from the clients fund at the clients request. This payment is the clients money paid on their authority to an IFA who they designate. IT IS NOT owned by anyone least of all the Network or the administrator. We need a court ruling and asap on this one.

  25. Martyn Sinclair 1st August 2012 at 4:53 am

    What about the promises of payment by the directors of Honister. How on earth are they able to walk away with absolutely no accontabiliy or responsibility.

    Wonder if there are going to be any sneaky redundcay packages for the directors……………?

  26. Nothing shocks me anymore in this industry !!

  27. Larry in London 1st August 2012 at 8:26 am

    It’s the same the whole world over,
    It’s the poor wot gets the blame.
    It’s the rich wot gets the pleasure,
    Ain’t it all a f&%$£@g shame!

    I love you all!

    Larrykins

  28. Becoming a headcase IFA 1st August 2012 at 8:40 am

    Advisers are not protected by their networks, in many cases. One IFA I know had (what I firmly believe) was a spurious complaint, which FOS recommended should be upheld, on a totally different basis to the actual complaint. The network accepted this without asking for an actual adjudication and without informing the adviser and sued him for £9,000.
    If he had been directly regulated he would have fought it and quite possibly have won.

  29. The network model isn’t broken, it needs changing and the only people responsible for changing it and protecting the interests of members are the directors.

    Commission accounts must not be classed as an asset of the network, they should be placed into a master trust account with each advisers entitlement nominated.

    It’s not complicated, it is easy to do so I wonder why all those networks who failed to protect the interests of members in this respect haven’t already done it.

    Makes you wonder why they are sitting on their hands doing nothing.

    And what is more, how have the administrators acquired the rights to members incomes? Not right, proper, morally acceptable and quite repugnant.

    The insolvency act does not seem to allow such sharp practice from what I can ascertain from its statutory rules.

  30. Remember the clarion call from the Honister management at the last Alicante conference was the now chilling words ‘ we have been through some tough times lets all stick together ‘ !

    Smoke and mirrors
    Ex Honister got out in time

  31. David Johnstone 14th August 2012 at 1:45 pm

    Mmmm….something smells with this.

    I was an AR of Interlink Premier Network Ltd, a Cardiff based IFA which went into liquidation around 2003/2004.

    The trail commission and client bank was ‘sold’ to Phoenix, based in Cromer, Norfolk. Grant Thornton was the insolvency practitioner.

    Seems like a re-run of the IPN debacle.

    Naturally, am wondering whether there is an ‘understanding’ in place between Phoenix / MacRobins and Grant Thornton?

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