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Sesame increases member charges due to regulatory costs

Appointed representatives of Sesame are set to see fixed membership charges rise by more than 50 per cent, with overall costs increasing on average by around 9 per cent per firm.

Currently, the fixed fee firm for an IFA is £29.20 a week, including VAT, but this will increase to £44.20 a week, including VAT, from August 1.

Mortgage and general insurance firms currently pay £19.21 a week, including VAT, but this will increase to £29.21 a week, including VAT.

A weekly fee is charged for each additional adviser within a firm. From August 1, IFA firms will see this rise from £28.58 a week to £43.58 a week per adviser, an increase of 52.4 per cent, while mortgage brokers will see the charge for each additional adviser increase from £19.21 a week to £29.21 a week.

Sesame is also increasing the percentage of turnover it retains from its IFA member firms.

IFA firms with an annual turnover of less than £100,000 will see their standard commission retention rate increase from 12.8 per cent to 13.05 per cent and for firms with a turnover between £100k and £250,000, the rate will increase from 10.3 per cent to 10.55 per cent.

Firms with a turnover between £250,000 and £500,000 will see their commission retention rate increase from 7.7 per cent to 7.95 per cent and firms with a turnover of £500,000 or more will see their commission retention rate increase from 6.2 per cent to 6.45 per cent.

The standard commission retention rate for mortgage firms will remain the same. Currently, these firms pay 9.7 per cent on the first £100,000 of turnover and 5.2 per cent on the turnover exceeding £100,000.

The minimum income a firm must generate for Sesame is set to rise from £4,843 a year to £5,495 a year, an increase of 13.5 per cent.

Sesame will also increase the amount it deducts from individual procuration fees from mortgage transactions from 1.5 basis points to 2 basis points from August 1.

Taking into account all of the changes to the charging structure, Sesame says the average member will see a 9 per cent increase in their fees compared to last year.

The network has roughly 1,200 appointed representatives.

Sesame managing director Nick Kelly says the decision was taken as a result of increased regulatory burdens from the retail distribution review and the mortgage market review.

He says: “It has been five years since we increased the charges materially. During that time, we have not only got increased running costs but a regulator which has put more systems, controls and oversights in place.

“And while we work very hard to improve the range of services and commercially leverage a business like Sesame has in the market, there comes a point when it is very clear what the costs are going to be to get through the RDR. You make the decision that you have to be transparent and have to act in a reasonable way.”

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Comments

There are 24 comments at the moment, we would love to hear your opinion too.

  1. I think this is going to open flood gates for all other networks to follow suit. Could be an interesting few months ahead as they all start jockying for position and increased numbers before RDR deadline.

  2. robert Lundon 8th May 2012 at 3:22 pm

    with the cost of PI on the up FSA fees on the up Sesame seem to think they can justify increaseing fees 51% this is a joke and another nail in the small IFA’s

  3. Would the last man standing please turn out the lights !

  4. Martin Bamford 8th May 2012 at 3:28 pm

    This sounds perfectly reasonable in an environment of rising costs. Our own expenditure has increased by over 26% in the last four months compared to the same period last year.

    Of course Sesame could struggle to implement this as the typical network member, in our experience, is very focused on costs rather than value.

  5. In my experience the worst Network outthere and i would also say their exit strategy is shocking. Get out while you can because they offer very little for the fees they charge. Go direct is my advice from past experience.

  6. Complete Compliance Support Ltd 8th May 2012 at 3:31 pm

    This begs the question as to why firms do not go Directly Authorised. Does being a member of a network represent true value for money?

  7. A reduction in IFA numbers also means a reduction in FSA and FOS costs and may be a way of reducing “less profitable” AR’s within the network.

  8. With the tools and systems coming out from SBG in the next few months that will make and advisers life so much easier, one of which will offer a complete end to end process with the client and offered at no cost to the adviser I think VFM is high with SBG. Will be interesting to see how many other Networks survive the new world environment as we know it. Whatever you want to be, be it with SBG!

  9. Stuart Gregory 8th May 2012 at 3:41 pm

    All well and good mentioning increased costs Martin, but do you think clients will accept the same sort of increase from their adviser as a result?

    Of course not – they’ll go elsewhere, so all that’s left is for the adviser to absorb these extra costs.

    All Sesame seems to want are large firms with 10’s of advisers – it’s a ‘one size fits all’ company that, from speaking to other advisers I meet, does very little to support small firms – if at all.

  10. increase by over 50%? A tad shrill and misleading.

    I think I’m a pretty typical one adviser practice and my total fees to Sesame will rise by around £1530 or 6.2%.

    Would I prefer them not to rise? Of course. Do I think I’m being ripped off? No, not really

  11. leave and become directly authorised its easier than you think.

  12. £10 per week. No increase for 5 years. Even I’m struggling to see what the big deal is.

  13. Laura Edwards 8th May 2012 at 4:23 pm

    If you are fed up of escalating costs and want to ensure that what you pay now will not increase, join SimplyBiz.

    2.5% guaranteed for life – it’s that simple!

  14. Based on the numbers above it would seem that Richard is already paying them the thick end of £25k per annum. They’d need to be adding a hell of a lot of value to be worth that.

    Even after a recent 30% increase, Paradigm charges less than £8k per adviser, although their current service standards are less than acceptable imho.

  15. Interesting times; on the surface it looks like sesame are doing quite a bit to their proposition with their platform, funds and new technology. These costs will need to come from somewhere and they seem to be making profit. If I were younger and looking to rejoin a network knowing what I know now I would be considering value rather than cost as any cheap non profit making firm backed by private equity will be short lived.

    For a profession that evaluates on behalf of clients we can be a little short sighted at times I wonder how many consider the financials of networks or large nationals before they join

  16. @ Laura Edwards – I didn’t think Simply Biz were a network and just a support service provider in which case 2.5% of turnover could be a bit rich don’t you think?

  17. A modest increase and, yet again, designed to put the squeeze on smaller IFAs who no one really wants I’m afraid.

    Positive Solutions are trying the same, charging less than £50k producers 35% of turnover. This has resulted in a loss of 40% of their IFAs in 2 years , from both the bottom and top end, and they now want IFAs doing £75k to £100k pa which is their “sweet spot” for charging (22% retention rate) and profit .

    All large IFA networks are struggling because they no longer have the masses to cover their costs, PS is down to 900 IFAs from 1,600 2 years ago

  18. Directly regulated has it’s advantages and disadvantages. Anyone considering going DA who after looking at what is involved thinks it might be worth joining forces with an exisitng DA firm instead in South East Kent, then you know where I am…… 🙂

  19. As I understand it, Sesame are paying out pretty much every claim from a complaint, The xs on their PII for previous members is £20,000. They pay out, then come after the x member. For existing members I don’t know what the picture is. So much for the safety of a network.
    Get out now, go FSA direct, making sure you operate as a Ltd company……but if you sold Key Data or Arch Cru, you may have trouble on the PII front

  20. Carlton Palmer 8th May 2012 at 9:21 pm

    @ Bert Poppins Yes, Simplybiz are a support provider, not sure on the 2.5% so cant comment but I have former colleagues who are members of them and are saving themselves a fortune after moving from a network!

  21. Old Dog when you say come after you do you mean they ask for the excess money or did they litigate?

  22. Denver Thompson 9th May 2012 at 8:55 am

    Networks are between a rock and a hard place trying to keep both advisers and fsa happy whilst trying to remain profitable in challenging times. I’m with Intrinsic Independent Ltd. They have provided loads of support in gaining diploma status and being prepared for rdr. I feel their take of the pie is reasonable for the support and peace of mind they provide.

  23. Gillian Cardy 9th May 2012 at 11:09 am

    Smaller networks, committed to Independence, do exist for advisers who still prefer to be in a network community. As with any business though, the fixed costs have to be covered and for the smaller IFA, going direct (and paying separately for all the compliance, PI, training and other regulatory costs) isn’t necessarily a magic cure unless your projections tell you that you can get better value for your business (and by extension your clients) by following a different path.

  24. Former Network AR 9th May 2012 at 5:29 pm

    Small price to pay for being subject to contract law, natural justice, the 15 year long stop and a peaceful retirement.

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