Honister Capital’s administration, announced last week, has left over 900 advisers and thousands of clients in an extremely worrying position.
Serious questions need to be asked as to whether the FSA could have done more to avoid the inevitable consumer detriment and huge worry and stress for advisers left without an income for an uncertain period, who may have to lay off staff as a result.
Advisers woke up last Tuesday unable to give advice, use their email systems or access client data, with all trail commission and pipeline commission becoming the assets of the administrator. Monthly trail commission payments due on the Monday were conveniently not paid.
IFAs will have to apply for reauthorisation, which could take months, and get individual client servicing letters to ensure trail is passed to their new firm.
Advisers who have looked to leave the group in recent months had been forced to stay due to sizeable lock-in periods.
The FSA, which monitors large distributors very closely, must have known that such a situation was on the cards but it appears there was no plans put in place to mitigate the disaster.
One temporary solution would have been the bulk transfer of advisers to a new entity. Such a proposal was put to the FSA but the regulator appears to now take a dogmatic stance against any such deal taking place, even if this stance leads to consumer detriment.
A bulk transfer would have allowed advisers to continue to service their clients while the FSA could still have conducted a review of the standards of individual firms if desired.
The FSA has perhaps misread the gravity of the situation when its says no significant extra resource will be devoted to helping with the reauthorisation process. Such behaviour only heightens the belief from certain parts of the sector that the regulator is happy to see a cull of advisers.
We welcome the FSA’s stated aim of ensuring at least 85 per cent of Honister advisers are reauthorised within five days of their applications being received. The longer authorisations take the more consumer detriment is likely.
In both the run-up to, and the immediate aftermath of, the administration, the FSA appears to have been slow to react. It has a chance to repair the damage by ensuring all decent advisers are reauthorised as soon as possible.