The chief executive of Sanlam has stood by his network's decision to increase its minimum fees despite the move causing multiple appointed representatives to exit the company.
Earlier this year the insurer-owned advice business changed its fee model to charge a minimum of £20,000 a year for all network members advising on pensions and investments, regardless of turnover.
The move saw some fees double and prompted advisers to hand in their notice and leave Sanlam, with one appointed representative warning the move could drive small firms out of the industry.
But speaking with FTAdviser, chief executive Jonathan Polin said the increase in fees was not a "hefty lift up" but more of a price correction.
He said: "We have a number of smaller advisers who are in the process of leaving. But I do believe it’s exactly the right thing to do.
"What people forget is that there is a cost of doing business in financial planning, a huge regulatory cost and every time a self-employed adviser of ours or a network appointed representative goes out there is a potential mis-selling case.
"So there is a potential mistake made that has to be compensated for and therefore you have to price that case correctly. And I think we had significantly underpriced it.
"This wasn’t a hefty lift up. It was bringing us I believe more into market."
Sanlam delayed the fee increase, which was set to take effect from April, for large firms in response to the coronavirus crisis. But this grace was not extended to its smaller network members.
In July FTAdviser reported about 30 appointed representatives had handed in their notice and almost 10 had already left the network, but Sanlam pointed out that fees were not necessarily the cause in all of these cases.
Sanlam was unable to give an updated figure of leavers for this article.
An amicable exit
Whilst the fee hike has been met with heavy criticism, with some advisers telling this publication it had prompted them to leave the market altogether, the network's handling of the leaving process has invited praise.
An adviser, who wanted to remain anonymous, told FTAdviser, the process of leaving Sanlam had been "really straightforward".
He said: "I get paid direct which makes a huge difference because the issue of money doesn’t come into it.
"The second thing was that Sanlam were quite happy after you worked your three month notice for you to carry on trading until you got authorisation.
"So in a way it makes for quite a harmonious process on both sides."
The adviser said he had previously left other firms which were being paid directly before passing on pay to the adviser, which could often lead to "suspicions".
He added: "For example you would have advisers holding back on doing cases and also the company themselves would be concerned that advisers could be turning away clients, telling them that the company is no good.
"This is not generally the case but because it has happened in the past you get this lack of trust on both sides, which doesn’t end up very well.
"Whereas my recent experience has been easy and comfortable."
rachel.mortimer@ft.com
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