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MM Leader: Could the FSA have done more on Honister?

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.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Perhaps the author of this article should instead take up a role in corporate recovery and turnarounds. Honister has been a business ready for failure for many years, that it has been allowed to continue to trade as authorised must be down to the FSA preferring to give the management opportunity to sort things out. There is a major past business going on at that business and has been for some time which has bled millions from the business. This advice under question was given by the advisers many of whom we are supposed to feel sympathetic for and plead for early authorisation to potentially carry on regardless of the trail of destruction left behind (that we will probably have to pick up through FSCS anyway). Blaming the FSA is poor and ill-considered journalism.

  2. RegulatorSaurusRex 12th July 2012 at 11:58 am

    No, the FSA couldn’t do much about this failure just as they couldn’t to a thing about previous collapses or any of the many that will inevitably happen in future.

    Most advisers could have got out a lot sooner but they failed to do so through lack of inertia and an unfounded fear of what their contract said.

    These advisers must avoid the mistake others have made by trying to follow those who made a hash of it and are now peddling their wares as a ‘new proposition’. The FSA will not allow them to take on any ARs, why on earth should they??

  3. Bert poppins, wake up fella. this was a devastating blow for 1000’s of advisers and staff. there families and well being is at risk & it should be the FSA who takes the blame. they should step in when disasters like this happen as they should with the banking nightmare. there were bound to be rogues in the 900 but now anyone connected to Honister is being made to suffer and wont get through the FSA’s re-authorisation quickly as required to save business’s. who else is to blame if not the FSA?

  4. Authorised at 7.11 – couldn’t advise on a bank account at 7.12 – Some clearly think that is fair and they are entitled to that opinion. Sadly we are paying for a few and for the most part long gone advisers. I fear for the network model – the pre-approval system in place at Honister for the past 3yrs meant that not one pension transfer of any sort could be submitted until approved – I wonder if other networks could say the same.

    Directly Authorised the way forward.

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