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MacRobins warns of ‘legal and practical reasons’ against Honister bulk transfers

MacRobins has warned product providers there are “legal and practical reasons” why they will not be able to bulk transfer ex-Honister advisers’ agencies.

MacRobins issued a statement today which it says aims to address key questions raised following its purchase of commissions from Honister administrator Grant Thornton. Advisers are being forced to pay up to 50 per cent of their recurring annual commissions to novate clients to another firm.

The statement says: “It would appear that, with the intention of assisting former advisers of Honister, certain product providers have issued termination notices in order to transfer sub-agencies to those advisers when re-authorised. We and the administrators are in correspondence with those product providers concerning their termination, as in addition to legal matters, there are practical considerations as to why this may not be possible.

“For example, Honister did not always link sub-agencies to individual advisers and many advisers shared sub-agencies. Access to Honister’s back office system, Intelligent Office, together with the knowledge of staff we have retained, is required to ensure correct allocations. Without access to Honister’s systems and former staff, any provider doing a bulk transfer of a sub-agency may inadvertently be transferring clients that were never linked to the AR named on the account which will also lead to data protection issues for those concerned.”

MacRobins says a further consideration for providers is that the transfer of agencies is “likely to cause a breach of a restriction, obligation or duty owed to Honister by the AR concerned”.

It adds: “In the circumstances certain advisers may now seek to rewrite business, which will give rise to clawback commissions for certain agencies. It would be normal to offset commission credits against these clawbacks, but allowing individual novations will prevent this.”

MacRobins also warns that bulk transfers may see some creditors’ financial position advanced over others.

It says: “The process of administration is designed to ensure that all creditors are dealt with in a fair and equitable manner according to strict insolvency rules. If certain product providers allow the transfer of sub-agencies they will be advancing the financial position of some creditors over and above others. Key creditors are likely to be clients, the FSCS, other product providers and other financial advisers.”

MacRobins says in light of this, providers should rescind any termination notices they have issued, reinstate commissions and support MacRobin’s transfer of agencies to ARs.

Earlier this month, Standard Life and Aviva insisted they will push ahead with bulk transfers of clients from ex-Honister advisers who have been reauthorised with a new firm. This would mean adviser would not have to pay MacRobins to novate their clients.

MacRobins also addresses a number of concerns raised by ex-Honister advisers under four headings:

Will MacRobins be marketing to clients?

MacRobins says it will not compete with former Honister advisers for their clients. However it says it has the right to contact clients and will actively promote itself to orphan clients.

What is MacRobins doing about pipeline business?

MacRobins says it has written to all pipeline customers and is providing “administrative assistance” with current applications that are yet to be completed. The firm says if a pipeline transaction is completed the adviser will receive the commission if they purchase their agencies from MacRobins.

The firm says it is informing clients that it will not be liable for advice given by the Honister adviser and warning them the professional indemnity insurance provided by Honister is no longer available and some clients “may wish to cancel the transaction and reapply rather than rely on the FSCS”.

Assistance with complaints

MacRobins says new complaints are arriving “on a very regular basis” and Honister has exposure to Keydata, Arch cru and Arc as well as Ucis, which is “likely to lead to further substantial claims on the FSCS”.

The firm is urging former Honister advisers to comply with Grant Thornton’s request to return all client files, saying “few advisers” have done so.

It says: “Without evidence of the sales process it is likely that future claims maybe upheld and increase the cost of the FSCS levy for all advisers.”

What will happen in relation to clawback commission?

MacRobins says it has been contracted to recover any clawback commission and has employed the Honister commissions team to maintain AR account positions. It says if debit balances occur it is contracted to pursue them on behalf of the companies.

The firm says the account balances will take into account any credit commission that has been received and notes that accounts which have been put on stop are continuing to apply the clawbacks.

MacRobins says: “Unfortunately, in insolvency situations such as this, a number of advisers will use the opportunity to rewrite business and generate debit balances in the expectation they will not be pursued for them. Where this practise arises, advisers may disadvantage the product providers with whom they do business. We will be pursuing the debit balances and the principals of the ARs have provided personal guarantees to allow for recovery in these situations.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Ahh, so there are data protection issues with customers inadvertently being transferred to the wrong adviser but there are no issues with them being transferred to MacRobins? Perhaps MacRobins in highlighting these admin failings at Honister will be increasing the potential for data protection complaints against Honister. GT will thereby, in the course of their actions, have increased the liability of complaint against Honister and decreased the remaining pot for creditors. Ooops

  2. What a mess. This could go on for years. I think MacRobins may come to regret getting involved in this debacle and they better have deep pockets because they will end up with large legal bills in fightingthe providers. It will be interesting to find out how much they paid GT for these “commission rights”. I would not be surprised if they have already noticed a huge drop in income from providers as more and more of the 900 advisers get in touch with a load of clients to bring them up to speed with what has happened and mandate their business away. I hope the advisers get 99% + of all trail income brought over to their new agency. The FSCS levy for this is going to be huge anyway and the drop in their old trail is going to make little or no difference to it.

  3. Lets hope McRobbins have paid a large amount of money for these clients and that they lose all the good ones and end up with the ones that do not pay trail but cause them additional work.

    Why have they been allowed to purchase these clients purely to then sell them back to the original adviser. If this is the ultimate intention, then this should have been done by the liquidators and the money used to pay the creditors.

    How TCF is that, FSA what are you doing about it?

  4. This is utterly shameful ! It brings to mind “…..and they drew lots for his clothing”. It could only happen in this industry couldnt it. Where is the protection For the ordninary IFA??? Furthermore where is AIFA, oh yes same place as they were when RDR as announced, heads in sand!!

  5. MacRobbins say:

    “Without evidence of the sales process it is likely that future claims maybe upheld and increase the cost of the FSCS levy for all advisers.”

    I assume this means that the Network(s) did not maintain supervise or closely monitor the business records of the Network members?

    That’s both stupid and disgraceful, and if it does indeed lead to higher FSCS levies for the rest of us, it’s also tragic.

    The Network model has been bust for years, if indeed it ever worked, and should now be banned altogether.

    Is anyone at the FSA taking any notice though?

  6. Macrobbin – they should drop the ‘S’.

  7. So the answer to NOT paying these people for something you were already entitled to is to send out servicing transfers to an advisers new firm/network. That way the issue is a no brainer. It also gives an adviser the opportunity to revisit everyone of their clients on a rota basis. If clients are happy to sign up with the adviser via correspondence, all well and good, but as I found out when I tranferred to my current network, a personal pre arranged visit can secure additional business.

    Go for it guys and don’t let this firm keep your renewals.

    One bonus of doing it this way is that any clawback or other liability is retained by the original firm.

    Better than letting these people rip you off.

  8. and in the daylight !

  9. As for them requesting the client files back, we are entitled to have a copy for our own records and Honister have had all file information scanned onto Intelligent Office for the past few years.

    If they require the files of the cases pre-scanning then they are welcome to schedule a visit to our offices where they can take photocopies of what we have.

  10. Whats the matter McStupid? Realised you’ve just been the biggest idiots in this whole fiasco. Too late to back out now – maybe you should have thought more wisely instead of letting greed rule your head. but hey ho vultures are stupid and desperate. I ceratinly wouldnt want such a ‘vulturous’ set of advisers being my servicing agent.

  11. Definition Parasite – ‘An organism that grows, feeds, and is sheltered on or in a different organism while contributing nothing to the survival of its host’.

    The Legality of ownership ultimately can only be settled in one way – a very long drawn out process through the courts. There is no way the new owners will instigate proceedings as it does not serve them well to do so.

    Looking through Companies House and the FSA Registers they are relatively small fry in what is the bigger picture.

    The issue of TCF and the ongoing servicing of all these clients would I argue be a test of even a national firms capabilities.

    How this deal was tendered and at what price hopefully will eventually come out into the public domain for all the creditors to consider when offered a few pence in the pound.

    I would dearly like to hear from the unsuccessful firms that tendered. This deal was certainly done at the express till.

    Putting things into perspective, Honister`s turnover I have read was in the region of £147 million. For this purpose round that down to say £100 million ( as probably included Willis Owen which was sold just prior to recent events ! ) . There were some 900 active advisers and if trail, renewal and recurring commissions were only say 40% that adds up to appx £40 million annually.

    Ex Honister advisers can now buy back their income streams for sums ranging from 7% up to 53% – add this all up and we are talking a tidy sum indeed.

    Remember, a group such as Honister ( in its various forms over the years ) have client banks going back potentially say over 20 years.

    During this time numerous adviser firms would have come & gone leaving a collective pool of orphaned renewal commission – I remember reading a relatively short time ago of a Group possibly smaller than Honister having potentially over £6 million a year coming in on this basis !

    Was this factored into the sale price – remember when the dust has settled there is going to be a substantial rump of annual commission still going to the new purchaser.

    On top of the orphaned commissions, you will have the ‘ un-purchased ‘ commission – by this I refer to commissions that ex Honister advisers do not ‘ buy back ‘

    Bear with me here, if up to now Honister as a group had £40 million a year coming in as described above, and lets say that factored down then amounts to only £15 million a year in total – at today’s rates to buy a business with no liabilities and using a multiple of 3 then surely at the very least £45 million minimum was secured for the creditors – will time tell ?

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