FSCS expected to step in as Honister declared ‘insolvent’
Grant Thornton, the administrator of failed IFA network Honister, has revealed to FTAdviser that the firm is effectively insolvent and unable to meet existing claims, as it predicted that the Financial Services Compensation Scheme will soon need to begin taking claims.
The Financial Ombudsman Scheme will be dealing with client complaints regarding Honister, which was placed into administration earlier this month, for the time being until the Financial Services Compensation Scheme officially declares Honister in default.
Honister, which includes IFA networks Sage Financial, Honister Partners, and Burns Anderson, entered administration primarily due to a failure to secure professional indemnity insurance.
The FSCS confirmed to FTAdviser that Honister has not been declared in default and said it therefore cannot comment further on the case at this time.
A spokesperson for the Fos said: “While a firm remains solvent, the Financial Ombudsman Service will deal with complaints about that business, but this may change in the future if a firm is declared in default or goes into liquidation.”
The spokesperson for administrator Grant Thornton told FTAdviser: “The FSCS had not declared Honister in default yet but the administrator says the group is insolvent and clearly does not have sufficient funds to cover existing claims.
“We anticipate claims to escalate in due course and the FSCS will need to take claims.”
Since Honister was put into administration, there has been outcry from advisers who have criticised the handling of the situation.
An IFA was previously told that should the unthinkable happen, IFA’s trail commission would be ring-fenced, but the administrators of the firm have frozen all accounts, including client accounts, leaving IFAs with no access to their commission income.
John Winful of Winful Associates, an IFA firm that was an appointed representative of Honister, also slammed the Financial Services Authority, stating that the regulator is “too focused on clients” and gives no protection to advisers.
Product providers, such as PruHealth, have also been accused of poaching Honister IFAs’ clients, as reported in FTAdviser’s sister title Money Management.