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Honister latest: How firms are coping with administration plight

Ex-Honister advisers have begun weighing up their options following this week’s administration and warn of the difficulties ahead along the various paths to reauthorisation.

Honister’s failure to obtain ongoing professional indemnity cover pushed it into administration on Tuesday morning, with many advisers learning of the firm’s fate either through the trade press or by rivals’ approaches to take them on.

Advisers expressed their anger on the Money Marketing site earlier this week at being left unable to advise and with any pipeline and trail becoming an asset of Honister Capital for administration purposes. Monthly trail commission payments due on Monday were not made and the administrators will not be accepting bulk novations of clients to new principals, meaning advisers will have to get individual client servicing letters to allow the continued payment of trail to their new firm.

A number of large distributors say they are offering support to advisers who may want to become an RI or AR with them.

Clive Lewis Financial director Gary Collinson says the ordeal has led the firm to pull out of giving advice altogether and it instead will look to act as an introducer. Clive Lewis has two advisers and has been with Burns Anderson, a Honister Capital subsidiary, since 1998.

Collinson says: “We will be introducing business for a small fee to someone else and that is where it will stop for us. We cannot afford to wait to get reauthorised. We have not got the money we are owed already and cannot continue without bringing money in. It is such a frustration and it is sickening.

“Burns Anderson has had its pound of flesh. It grieves me that we are scrutinised to the finest degree having never had a complaint yet they get away with being insolvent at the top. What is the point in us being solvent or professional if the overarching company is allowed to reach this stage?”

Shepherd Insurance and Mortgage Services director Mike Osmond says the firm has yet to consider what authorisation route to take because its priority is to ensure its clients are going to continue to be serviced. The firm has been part of Burns Anderson since 1995.

Osmond says: “We have to make sure the clients are going to be okay and that is the main concern at the moment, authorisation is not what we are focusing on at present.

“What I do find strange is that at 7.11 on a Tuesday morning you can be allowed to give advice on some pretty complex issues and at 7.12 you cannot even talk to clients about an Isa.”

One anonymous adviser says although networks are offering Honister advisers a route back into the market, they are not telling advisers the whole truth about how long it will take to become authorised again.

He says: “The large networks are saying you can be authorised within a few days but the FSA standard will tell you that it can take much longer. The recruitment guys will tell you it takes seven days to get you to sign the form.

“The problem the industry has is that directors of large networks borrow money and unfortunately the personal guarantees for the firm are advisers’ trail and follow on commission because the network knows if something goes wrong there will be six months of commission to come in after the collapse.”

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Surely there must be an FSA fast track fall back for incidents such as this? As long as an adviser has no complaints pending re-registration should be simplistic.

  2. I have been there. It is awful. Your commission gets paid to the administrator, you are powerless, the FSA has withdrawn your permission and by the time you are re-authorised, 9 months has gone by. Them it’s a further 3 months before any income comes in. A year without income with no blame on your part! The FSA are bad people (sic). They themselves can move seamlessly between jobs but do not allow advisors to do so – that is inhuman & scandalous. Surely it must be against some EU human right to work or transfer of labour etc?

  3. You shouldnt forget the Honister staff.

    They have been left without ANY money. They have been given no notice period, no redundancy, expenses are outstanding and they are all looking for jobs.

  4. Fast tracking is often mentioned but I do not think the FSA would do this. Fast tracking would mean other non-Honister firms who are applying to get a new joiner authorised are pushed down the queue.
    It is sad for all concerned but affected advisers/firms should have had a contingency plan for such an eventuality if only to put aside capital.
    Honister could not get PII – that says a great deal and explains why the FSA were not prepared to do a mass “transfer”.

  5. These are very worrying times, RDR aside, I have thought long and hard about how we who work with the network environment can avoid the same fate should such a situation arise, which by the looks of it
    will become more common as we proceed towards the cliff edge deadline of RDR.

    Seeing 900 advisers disenfranchised and of course the staff, although they will be entitled to employment support allowance and other social benefits as well as statutory redundancy payments eventuall, left high and dry overnight without their income entitlements is not something we should just accept.

    The FSA are totally ruthless in these matters and do not give a damn as to what advisers income entitlements are.

    Surely now is the time networks need to restructure their offering and ensure all their IFAs are individual practices which are DA and they provide compliance and accounting services for fees and commissions etc.

    It would not be beyond the realms of common sense when such matters arise that a period of calm reflection by the regulator ensues and that all RIs of the firm are granted a temporary permission to trade in their own names immediately a network goes into administration.

    Networks also need to farm out their accounting and payment services under a separate Limited Company and written as a master trust banking arrangement to protect the advisers rights to their earnings in case of such events and that if such an event occurs, the administrator will have to liase with the accounting service to ONLY get what the network is entitled to as their share under the terms of the contracts they have with the advisers.

    Trustees of the accounts should of course be the directors and a few other individuals chosen by the firm, just in case the directors are suspended for any reason.

    If we have no plan of action to avoid such a situation, we have no way of coping with it.

    The administrators should NOT be entitled to withhold advisers income, especially any renewal / trail income and fees, business in the pipeline can be cancelled and re-written as a matter of common sense as no one in the administrators firm will have the knowledge or expertise to bring it to a conclusion and that would be the best advice under TCF.

    Putting 900 adviser practices in such a lamentable situation is despicable.

    This is going to occur again and again as the squeeze on investment business that is surely going to come about as a consequence of the RDR and of course the economic situation the country is in, which just exacerbates the problems advisers will have in being able to maintain their practices.

    Anyone have a better suggestion ?

  6. The FSA are under huge pressure now to restore confidence on both sides of the fence. There will be clients suffering financial loss here and that is as important as the advisers and Honister staff that have found themselves unemployed.

    The regulator should be coming forward with a fast track solution early next week and from conversaitons I have had, FSA applications that are in the pipeline will be brought forward.

    My only hope is that the opportunistic scavengers have sufficient resource to meet the mass influx of RI’s and AR’s otherwise we will be having this conversation same time next year?

    The network model is suffering badly accross the board and this is a strong indicator that in most cases it is no longer commercially viable….

    If you are choosing then choose wisely!

  7. I think the FSA’s silence and in-action regards this speaks volumes.

    They offer these people no comfort or any resolve, it go’es to show what they think of the IFA’s, thier families and the support staff. Then on to the clients ? surely this needs to be addressed PDQ ?

    Also where are all important trade bodies AIFA, IFP PFS etc etc etc ?

    All in all we must be talking thousands of people here.

    I do hope this wont turn out to be another Park Row

  8. Unfortunately, this is always the risk if you choose to run your own business under the umbrella of a larger group/Network/National.

    You get certain advantages – not having to complete GABRIEL springs to mind – but you will never be fully in control of your own destiny if you choose not to be DA.

    Sad for the advisors involved, but they knew the risks – particularly given the very chequered history of this particular group.

  9. Why do the FSA insist on copmleteing new forms, when the regulation began back in the 80’s the whole idea was that once your application forms had been completed the whole system was to be portable. They know who you are! they have your firms and personal records on file and your annual declarations, so why do they need to make you go through the whole system again? You just need a transfer form system. This should not longer than a few days, all they need to do is cross reference your data.
    I understan if you join another firm or ogansation they need refferences, to do their due diligance but in this situation you are authorised one minute then through no fault of your own your not?
    How can you not be fit and proper in minutes?
    The providers should agree to novate your re occuring income as soon as you are ready to go again. They just get rich for a few months and the poor client is stuck without anyone to discuss the situation with.
    The regulator and providers need to make some serious changes to the way they operate.
    A disaster recovery plan needs to be put in place, because I am sure this is not going to be the only company this will happen to this year and the future. Any liquidators involvment they should not be able to distroy peoples lifes in this way, I am sure there must be some european law that could stop this. Quite frankley we are treated worse than animals. The whole system needs to be changed!
    What a great business, we pay a fortune to the regulator and we can be sued even when you retire.This is just not correct, the majority of IFA’s have given a great servcie to there clients for many years. We are been squeesed buy regulation costs and legal cost, why would anyone want to come into this industy the way it is as a career, or set up in business. Even Richard Branson took a back seat when he relised that the regulation was insane and just seems to fine people and find fault as oppsoded to help create an industry that could be world leading.
    We have lost a lot of money over this and my people and their families are all going to suffer for a few months.
    Its time to change the way we work as an industy we need to work together and discuss this with the FSA and providers if we don’t there will not be many people left to regulate.

  10. I work within Sage/Honister and are now in the situation of trying to switch to a new network. The FSA have literately no idea whats going on and have offered no help at all. We as adviser have to work by TCF (treating customers fairly) and now with Honister going under all current pipeline business (mortgages in my instance) are now in no man’s land. We can not communicate with the lender or the clients as we are not registered to give advice. The help line given to us is of no use and now all of our clients have been materially disadvantage. It is a very confusing time and I believe legal action will have to be taken

  11. Tyburn Asset Management 6th July 2012 at 1:16 pm

    This is just horrible for all involved with this mess. Unfortunately though sometimes you get punished for leaving your head in the sand. If it looks like a duck and quacks like one it probably is one…..

  12. Lynne Robertshaw 6th July 2012 at 3:40 pm

    Thanks to the person who acknowledges that Honister staff are also suffering under the current situation through no fault of their own. Those who were bullied, cajoled. made redundant and made the whipping boys by other areas of the business when all they were trying to do was appease the regulatory authority, advisers and the management. An impossible task to keep a company above water when being pulled in so many directions. I am sorry for ALL who have been adversely affected by this situation not just one sector

  13. 900 advisers probably with 6 ongoing cases – 5,400 unhappy clients – TCF?
    This situation should not be left to the company to sort out – orderley? how can it be?
    It is a sorry mess, clients will lose out especially on time sensitive areas of advice. What can be done for these clients?? it is not just the advisers we should be concerned for???

  14. Philip Wasley 6th July 2012 at 8:51 pm

    As an ex Burns Anderson adviser I have in my files the February email of Mr Pearson, informing all of us that Honsiter was on a sound financial footing. I think the phrase liquid was used. If this was the case then what is the FSA going to do about this blatant lie? Where was the continued due diliegence? Where was the warning that consumers get over potentail mis selling or in this case mis advice?

    What do the positive solutions guys feel over Mr Pearson now being at the helm there?

    I feel that we as advisers should instigate a further forum, maybe initially a facebook page in which we could alll join and then organise a collective voice that fights this continued persecution and neglect and attack on our integrity and livelyhoods.

  15. Julian Stevens 9th July 2012 at 10:17 am

    Unless the FSA has reasonable grounds to doubt the integrity and competence of any of the (now) former Honister/BA advisers, then on what basis can it defend any action other than to do everything possible to fast track these peoples’ reauthorisation via a different firm? Apart from anything else, any new firm wouldn’t want to take on board anyone with a dodgy track record.

    Those affected could, of course, write to the FSA asking this very question (or they could ask their MP to do so on their behalf) but the likelihood of any meaningful response must surely be extremely slender. It’s the same old lack of accountability problem, despite the FSA claiming on its website to be “an open and transparent regulator”.

    My fear for the Honister/BA people is that they’ll be subjected to the same treatment from the FSA as all the former Park Row advisers. Nightmare.

  16. man on the moon 9th July 2012 at 11:49 am

    the landscape will change again.

    the balls of our business is that we are all damned.

    our only hope is that potential clients like us more than the banks

  17. Larry in London 9th July 2012 at 4:31 pm

    Networks don’t work. Apart from a nursery network to get someone up and running there is no real business case for them. AVOID.

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