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Sesame reveals adviser impact of network closure

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Sesame Bankhall Group has revealed what member firms have chosen to do following the closure of the distributor’s investment advice network.

In March, SBG announced it would no longer operate a network for investment advisers. Appointed representatives were given the choice of going directly authorised and buying support services through Bankhall, moving to SBG’s “preferred network partner” Intrinsic, or leaving the network altogether.

Firms were given three months contractual notice to make a decision on their chosen route by 31 July.

SBG has now released estimated numbers on member firms’ intentions. As some firms are waiting to be reauthorised, final numbers are expected at the end of August.

Out of a total of 350 member firms, 150 have decided to move to Intrinsic. Some 105 firms are going DA with support from Bankhall, and 55 are either leaving to go to another network or leaving the industry.

The remaining 40 firms have decided to reduce their regulatory permissions and will become part of Sesame’s mortgage and general insurance arm.

Based on the value of advice firms and total turnover, Bankhall has emerged as the preferred route.

Money Marketing understands some firms that initially opted to go DA were encouraged to find a network partner instead.

The restructured SBG business will house around 1,000 mortgage brokers and aims to build on its DA proposition through Bankhall.

Speaking to Money Marketing, SBG executive chairman John Cowan says Intrinsic was chosen as its network partner due to the fit between the two firms.

He says: “We thought Intrinsic’s strategy was much more focused within the wealth space, which is in line with its parent Old Mutual Wealth’s wider investment strategy. The fact that Intrinsic was already a restricted network also played a role. Ultimately, this was driven by wanting to secure an orderly transition of our investment advisers.”

Cowan admits there is a commercial agreement in place backing the network partnership, but did not disclose the terms of the deal.

Liabilities and “pressure tactics”

It emerged last month that Aviva and Friends Life, which owns Sesame, has pledged £45m that Sesame can draw upon over the next two years to cover potential liability and restructuring costs.

Cowan says: “We are absolutely committed to getting this business up and running profitably, so that financial resource is there to support us. We don’t see it as a fund for us to spend as we like. Once we have got the restructure behind us, we believe we can make a significant profit.”

In terms of what issues the liabilities relate to, Cowan says: “There is a project that we are working through at the moment, that is an enforcement issue related to pension transfers. Running an advice firm you never know what is going to come out of the woodwork so that fund is sitting there to support the business.”

He says although there was a lot of clamour around saving the Sesame Financial Adviser School, this turned out to be “noise” and no-one has come forward to secure the school’s future.

Cowan dismisses claims that SBG applied “pressure tactics” in getting members to choose its preferred routes of either support services from Bankhall or moving to Intrinsic.

Firms choosing either route were offered benefits such as SBG paying Financial Services Compensation Scheme interim levies, not freezing commission accounts, and giving firms up to six months to return client files.

But Cowan says: “Members had one month to think about what the move meant for them. When we then announced Intrinsic as our network partner firms had a further three months to decide what to do.

“There has been no pressure tactics at all. Advisers had the choice between Intrinsic and Bankhall or going elsewhere. That choice was completely free to them and there was no financial incentive.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Advisers who ‘went elsewhere’ were given and unrealistic timescale to get directly authrorised, were faced with a freeze on commission, potential doubling up on some regulatory fees, and not given 6 months to return files. Going to Bankhall (with a likely tie in) or joining Intrinsic (a commercial deal) didn’t. How is that an open choice with no pressure with no financial incentive?

  2. peter mulholland 11th August 2015 at 9:06 am

    Guess I should thank them though for giving me the shove out the door haha
    Many years ago

  3. Some of us have been predicting the death of networks ever since RDR was first mooted. Indeed I always thought one of the prime purposes of RDR was to kill them off.

    Personally I always thought that Networks were blight. A parasitic organisation that seemed to attract (in the main) the less able and the more idle, who glibly believed that hiding under the skirts of a network would enhance their income while protecting them from regulation.

    The networks themselves did little to enhance the reputation of advice by bidding up commission rates and doing deals with providers, yet duping the public into believing their members were independent. Their demise I believe is all to the good for financial advice.

    Congratulations to the 30% who have now (at last) gone DA. Good luck to you all and best wishes for a prosperous future.

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