IFAs face continuing problems after Honister collapse
900 advisers affected by network’s inability to obtain PI cover
Numerous advisers have been left in the lurch following the collapse of the Honister network.
Honister Capital Limited, which had more than 900 self-employed appointed representatives, went into administration on 3 July 2012.
Grant Thornton, which was appointed as the administrator for the network, said an inability to secure professional indemnity (PI) insurance was at the root of the problem.
“Over the past few years PI insurance costs have increased to unsustainable levels, driven mainly by large claims relating to historic business and, to a lesser extent, wider industry issues,” it said in a statement. “This has had a material impact on regulatory capital requirements and the company’s ability to trade.”
Advisers working with Honister have been unable to service their clients since the firm collapsed and are now being forced to consider their options for relocating. Positive Solutions and Sesame said they were in the process of recruiting advisers looking for a new home, but some advisers are looking at the direct authorisation route.
James Espin, IFA at Honister trading company John White Associates, found out the network had gone into administration when he received an email at 7:15am on the day it occurred. He said he is concerned other networks may have similar problems.
“The leanings at the moment are towards going direct and not risking going with another network,” he said. “As much as you can look into the accounts and profitability and everything else, you just don’t know what’s around the corner.”
Espin added that a primary concern for him, if he joined a new network, would be ensuring it remained committed to independence rather than supporting the restricted route.
The FSA said that although affected firms would not be able to give regulated financial advice, they could contact clients to make them aware of the situation.
Espin said he did not want to “unnecessarily worry” clients about the situation but said particular pieces of business for clients could not be carried out until he was again authorised.
“Clients are quite understanding,” he said. “They realise it is having a bigger impact on our business than it has on their individual circumstances.”
In a statement, the FSA said advisers could either remain an appointed representative (AR) with a new principal or become directly authorised. While the FSA says the latter takes three to four months in a straightforward case, advisers’ experiences of remaining an AR and changing principal range from several days to several weeks.