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Honister administrator receives ‘definitive’ legal advice over commissions

Honister Capital administrator Grant Thornton says it has now received “clear and definitive” legal advice that trail commission payments are owned by the company and not individual advisers.

In a letter to creditors, seen by Money Marketing, Grant Thornton says following the legal advice, commission will be transferred to the administrators and MacRobins, the IFA firm that agreed to buy pipeline and recurring commissions from the administrators. The commission had been held in trust pending this clarification.

After Honister entered administration, Grant Thornton sold the firm’s recurring and pipeline commission to MacRobins with advisers forced to pay a one-off charge of between 7 per cent and 53 per cent of recurring annual commission to novate their clients to another firm, depending on which part of the Honister business they were part of.

A creditors’ note to Honister Partners, one of the subsidiaries, says 216 advisers have now paid to novate, amounting to 36 per cent of the reauthorised advisers. Honister Partner advisers were charged a 7 per cent novation fee.

MacRobins has so far raised £266,000 through sale of commissions back to Honister Partners advisers.

A 10 per cent administrators’ fee was also charged on top.

The letter also confirms that over 300 claims against the failed business have landed with the Financial Services Compensation Scheme. Honister entered administration in July after failing to secure professional indemnity cover.

Grant Thornton says there were 192 complaints against Honister Capital upon its appointment in July and a further 112 have been made since.

Out of the 304 complaints, 167 relate to Burns Anderson, 84 are from Sage Financial Services and 47 relate to Honister Partners. The origin of six complaints is currently unknown.

Grant Thornton says Honister’s former professional indemnity insurer Liberty Mutual, claims it is not responsible and complaints are currently being dealt with by the FSCS.

The administrator adds it has now been given definitive advice which confirms commission payments are owned by the company and not by the individual advisers.

Grant Thornton says it is currently investigating the restructure of the group in December 2011 which saw Honister Capital’s direct arm Willis Owen moved to a separate company and fall outside the insolvency process.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. As usual ‘legality’ has little to do with ‘morality’.

  2. How exactly will this help MacRobins if ex-Honister members go round getting new post RDR style client agreements which say they, rather than MacRobins get a fee?

    They would still get trail on protection business I suppose but in my experience the vast majority of protection products can be rebroked with like for like cover over the same remaining term AND result in a lower cost for the client.

  3. The FSA should intervene asking MacRobbins to demonstrate their plans to justify their trail income. How can a Company with 5 advisers service the entire client bank of Honister? This is a good opportunity for the FSA to show that they are there to protect advisers as well as castigate them. Network ownership of any income should only be enforced if it can be proven that it is required to offset against liabilities. It seems ridiculous that the very Company that let its advisers down so badly can benefit from the situation.

  4. I was contacted by Sage just before they went into administration saying they couldn’t find my contract and could i sign a new one (which i didn’t). How can they therefor ‘legally’ take my commission. Also the timing of the request to sign a new contract suggests the old contract may have suggested i owned the clients and commissions….

  5. Spooky how the HPL bank balance is just about the same as the administarors fees………

  6. RegulatorSaurusRex 7th February 2013 at 9:52 am

    Obvious really.

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