An IFA with failed network Honister Capital has expressed anger over the freezing of his trail commission following the firm falling into administration, saying that it had previously assured advisers that all client accounts were ring-fenced.
Honister, comprising of Sage Financial Services, Burns Anderson and Honister Partners, went into administration last week, due primarily to an inability to secure professional indemnity insurance cover. Grant Thornton has been appointed administrator of the firm.
Following the firms collapse, a spokesperson for Grant Thornton confirmed to FTAdviser that advisers’ trail commission had been frozen after complaints from former Honister IFAs.
Adviser John Winfull of Winful Associates, an IFA firm that was an appointed representative of Honister, said that if the accounts are not unfrozen he could ‘conservatively’ lose 20 per cent of his income.
However, an IFA of Sage Financial Services, who requested not to be named, has told FTAdviser that Sage confirmed to him via email in 2010 that the firm had a completely separate bank account from the member commission payments and that these were essentially ring-fenced.
In 2010, Honister changed its bank account from HSBC to Natwest. The previous Sage bank account was called Sage Members’ Account, but the name was changed to Sage Financial Services.
The IFA and several colleagues questioned the change in name, in documentation that FTAdviser has seen, but Sage responded that only the name had changed and commission payments were still in a separate account.
The email said: “I can confirm that the bank account for Sage members was changed to NatWest in line with the group banking. It is set up with NatWest in the same way as it was with HSBC, the account... is for the receipt of commission payments.”
The IFA 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 IFA also slammed the Financial Services Authority, stating that the regulator is “too focused on clients” and gives no protection to advisers.
The IFA said: “I cannot believe that it is not a requirement of the FSA to ring-fence incomes.
“The FSA spends plenty of time protecting clients but not advisers. We are the lowest common denominator; we are the pawns. If something goes wrong with clients, everyone comes to us. When something goes wrong with a network, nobody seems to care about fixing it.
“The FSA is too focused on clients who are completely unaffected by this. Nobody seems to have any sense of protection for advisers.”
Last week, a spokesperson for the administrator said: “It [trail commission] has been frozen. The administrator has a duty to make sure the commission is only paid when it is due and it will take a little time to find out who earned what.”
