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.”