FTAdviser.com

Advertising

The group said that, in the face of the new TCF principles and the RDR, there was an urgent need for advisers to have recognised standards of regulation to protect clients whose adviser chooses to move firms, networks or parent company.

In recent years, 2Plan said, there has been a tendency by some advisers to take it upon themselves to decide exactly what they will do, often with their decision being driven by commissions and recurring income streams. 2Plan said it was time to put the kibosh on this behaviour and do what was in the client's best.

Chris Smallwood, chief executive at 2Plan, said: "When an adviser leaves one organisation for another, they should be free to offer their clients a seamless transition, with ongoing service and minimal disruption."

In that way, he said, they can transfer their clients and all their policy details quickly and easily to the new host company and, importantly, continue to receive clients’ policy valuations, updates and information from product providers.

"While some firms already do operate this simple novation policy, those that do not are causing many smaller advisers - and their clients - real headaches," he said. "In some cases, this is clearly being done simply for the reason these big firms want to hang on to assets for their own commercial purposes, which just isn’t in the spirit of the industry."

While there is no official regulation concerning novation, the FSA has thrown its weight behind the issue and in the past has released documents relating to novation for banks.

According to a previous FSA statement, in a novation, the existing agreement between the originator and the borrower is cancelled and a new agreement between the investor and borrower is substituted.

"This effectively transfers all the seller’s rights and obligations to the buyer. In the FSA’s view, the cleanest transfer of risk is achieved by novation."