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Provider confusion over obligations for Honister clients

FSA confirms to FTAdviser that it has no concrete rules as to how providers should deal with situation.

By Michael Trudeau and Ashley Wassall | Published Jul 19, 2012 | comments

Product providers have expressed confusion as to their obligations in relation to clients of Honister IFAs whose advisers are suddenly no longer authorised, which has prompted several to contact clients directly giving them the option of appointing a new adviser.

Concern was raised by one IFA in particular, after one of his clients was sent a letter by James Hay in relation to their self-invested personal pension.

Gareth Nelson, an IFA at Allen Charlton Ltd, said he was unhappy that the provider had chosen to contact his clients without contacting him first and without copying him in on the correspondence.

Mr Nelson was also unhappy that the firm had included a form with the letter to allow the client to appoint a new financial adviser.

According to Tim Sargisson, managing director of James Hay, the firm must contact Honister clients under its own treating customers fairly obligations.

He said that the firm did not speak to the advisers as their unauthorised status means James Hay could fall foul of FSA guidelines. Mr Sargisson added that the form was included as even if the old adviser was re-appointed they would need to be added to the policy afresh.

He said: “The FSA is quite prescriptive on its website. We are expected to write to IFA clients and explain what has happened and what their options are.

“We’re damned if we do and damned if we don’t. There is a good chance that if we spoke to the adviser first we’d get kicked by the FSA for speaking to an unauthorised adviser about a client.”

The Financial Services Authority told FTAdviser there are no concrete rules governing how a provider should respond to a situation such as this, but would not comment on the Honister case specifically.

FTAdviser contacted a number of other advisers and found a range of approaches being taken towards Honister clients.

AJ Bell-owned SippCentre has written to advisers and included a copy of a yet-to-be-sent client letter that it says it will not send if advisers raise “concerns”.

AJ Bell technical resources manager Gareth James said: “Where advisers have contacted us, for example to tell us that they will shortly be authorised, we are taking their feedback into account.”

Platform provider Ascentric said it has not yet written to clients and will wait until a client wishes to do business through the adviser, at which point the situation will be explained and further action taken if necessary.

Fellow platform provider Transact has written to clients but did not include the form for appointing another adviser.

Malcolm Murray, head of marketing at Transact, said: “We wrote to clients the very next day as we are obliged to do, to let them know that Honister had ceased to deal.

“We had to make it clear to the client that we could still deal with any request they had, but that in the meantime the client wasn’t being abandoned.”

Mr Sargisson said: “The action we’ve taken might be deemed as being heavy-handed. I don’t think we have been heavy-handed, I think our approach is appropriate.”

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