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.”