When Lee Smith, IFA at Greenhill Wealth Management Limited, decided to leave Tenet in September 2014 he was shocked by the exit bill he received.
He was told to cough up professional indemnity fees of £708.80, fees to the Financial Conduct Authority of £1,333.60, additional regulatory fees of £2,692.57, a resignation fee of £500 and three-month fees of £1,941. This equates to a total of £7,175.97.
Mr Smith, who became an IFA in 2010, said he was shocked at the amount he had to pay to ditch the network, given comments made by a Tenet director in a video interview with FTAdviser late last year.
In April last year, two advisers from two separate firms slammed Tenet for imposing an unexpected £500 charge to leave its TenetConnect adviser network, which was not outlined in the contract they signed at the time of joining.
In FTAdviser’s video, Tenet’s group regulatory director Gill Davidson responded to criticism it received over non-contractual exit fees, stating that this came as a “surprise” and adding that exit fees are “really not something that is on our agenda as being an issue”.
Whether someone who is leaving Tenet is even charged an exit fee will depend on “circumstances” and are essentially simply charged in instances where the network needs to collect client files, she explained.
Ms Davidson said where exit fees could be charged is where “we literally have to hire a man with a van with boxes to go and collect the customer files. That is really what it is about.”
She added: “If we have got somebody with a disc – and it is all on the disc – then there will not be a charge.”
However Mr Smith said despite scanning and transferring all his files on to a flash drive and taking it to a Tenet office, he was still hit with a whopping bill.
He said: “What Ms Davidson said is untrue. If I had known I would have to pay the fee I would have never bothered spending so many hours scanning my documents. I would have just left it for Tenet to do.
“I would never touch a network again. Being directly authorised is stressful, but I find it financially beneficial. I am only a small one-man band and I expect to save £10,000 in fees this year.”
Mike O’Brien, managing director of TenetSelect and TenetConnect, said in retrospect he was sure Ms Davidson would give a more comprehensive answer on the purpose of exit fees if asked the same questions by FTAdviser again today.
However he noted Ms Davidson’s comments did not change the fact that firms were made aware of exit fees in advance and they are contractually due and payable. With the exception of the resignation fee, none of the other items Mr Smith was charged for were exit fees.
“In the majority of instances these fees are no different in a network environment than they are in the directly authorised space and would have been payable whether the firm exited or not; although we acknowledge that the timing of payment does change.”
In terms of the biggest fee, Mr O’Brien said Tenet does not make a profit on FCA or any other regulatory fees and simply seeks to recover the costs allocated to it by the FCA, based upon a firm’s turnover and product lines advised upon.
emma.hughes@ft.com
