Honister administrators sell commissions to corporate IFA
The administrators of failed IFA network Honister Capital, have informed the firm’s former advisers that the rights to their recurring revenue streams have been sold to corporate IFA MacRobins Ltd.
In a move likely to provoke fury among former appointed representatives of Honister’s various network brands - Burns Anderson, Honister Partners and Sage Financial - advisers have also been told that in order to novate their commission to a new agency, they will need to pay a pecentage of income accrued over the past 12 months as an upfront fee.
In a letter to all appointed representatives, sent out today (1 August), the administrators from Grant Thornton state that Burns Anderson Ltd advisers will have to pay 53 per cent of commission income earned over the 12 months to 30 June 2012. Sage Financial and Honister Partners advisers will have to pay 20 per cent and 3 per cent respectively.
Nigel Morrison, joint administrator, says in the letter that commission income is “legally owned by the group subsidiary under which they were authorised to provide advice to clients”.
Mr Morrison adds that that, in order to fulfil their obligation to achieve the best outcome for all creditors, they could not “novate the agency agreements to other authorised entities which the advisers are joining for no value”.
He states: “In that scenario only the advisers would benefit from the commissions and it would reduce the dividend non-adviser creditors would have received had we sold the commissions.”
If advisers choose not to purchase the rights to the commission, MacRobins Ltd will retain all rights to future commission income.
IFAs have been angered by the retaining by the administrators of their commission income, after client accounts were frozen following Honister’s fall into administration last month.
One IFA, John Winful of Winful Associates, an appointed representative of Honister, said that if the accounts are not unfrozen he could ‘conservatively’ lose 20 per cent of his income.
He added that advisers were told in 2012 after a change in account provider that commission accounts would be ring-fenced.
Mr Winful said: “We were told that Sage trail commission was ring-fenced and it was called the ‘members’ account’. The name was changed when the bank was changed. A bunch of us queried this but we got an email saying nothing had changed but the name.”
The Honister administrators have set a deadline of 31 October 2012 for advisers to accept the offer, pay the required fee and return their documentation. Advisers must also prove they have been re-authorised either directly or through another network by 31 December 2012.