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FSCS hit by over 300 Honister complaints

by Jun Merrett on Feb 04, 2013 at 12:31

FSCS hit by over 300 Honister complaints

The Financial Services Compensation Scheme (FSCS) is dealing with over 300 complaints against advisers who were in collapsed IFA group Honister Capital.

Honister administrators Grant Thornton has also rubber stamped the sale of ex-Honister advisers’ trail commission to corporate advice firm MacRobins.

In a note seen by New Model Adviser® Grant Thornton said that since it had been appointed administrator last year it had received 112 complaints against Honister advisers, which were not covered by professional indemnity (PI) insurers and so were being dealt with by the FSCS.

It said prior to Honister’s collapse it had 192 outstanding complaints. It said the PI insurer was disputing whether it would cover these claims and so they too were being dealt with by the FSCS.

Honister entered administration in July 2012. At the end of July Grant Thornton announced it had sold the group’s trail commission to specialist corporate IFA group MacRobins.

This resulted in outcry from advisers who claimed they, and not the networks to which they belonged, owned the trail.

In the note published today Grant Thornton said it now had definitive legal advice that the commission was the group’s asset and not the individual adviser's, and so has released the commission, which had previously been held on trust awaiting legal advice, to MacRobins.

Grant Thornton had offered advisers in the Honister networks, Sage Financial, Burns Anderson, and Honister Partners, the chance to bulk novate a percentage of trail commission.

The percentage advisers had to give away varied depending on which network they belonged to. Burns Anderson advisers were the worst hit, having to sacrifice 50% of recurring annual commission.

Grant Thornton said 216 of the group’s advisers, or 36%, had taken up the offer.

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31 comments so far. Why not have your say?

Richard via mobile

Feb 04, 2013 at 12:46

No problem, the rest of us will pick up the bill, as usual

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Paul Howard via mobile

Feb 04, 2013 at 12:59

How can the PII provider be saying they are disputing claims? If they received a valid complaint - they should cover it.

Absolutely shocking though how such a large firm appears to have got away with this.

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Des Rushworth

Feb 04, 2013 at 13:07

Grant Thornton are the receiver, they sold the trail. Was this to pay their fee? Should it have been used to provide protection with run off cover? As MacRobins now have access to the clients, have they sold other investments to the clients, which has led to the complaints about the original advice? Not all is clear other than we have to remember there are less of us each year to pick up the tab for FSCS, it could be the levy which puts small business out of business, which then causes more of the same. If the only way you can earn money from a client is to unsettle them about the previous advice, generate a complaint against a firm or individual who is no longer in business, be carful what you wish for, you could end up putting yourself out of business.

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Hickky

Feb 04, 2013 at 13:09

The directors signed off that there were sufficient funds available to pay out claimants.

Grant Thornton have not yet produced a report on the conduct of the directors either, perhaps they got the job on that understanding.

No indemnity insurer would cover them, so they had to go into liquidation, but it was the negligence of the directors to sanction sales of products whose risk did not match the assessed risk of clients that got them into that state in the first place.

When the FSCS wants to access funds to pay out to the unfortunate investors with a legitimate claim, let them first go to the directors and wipe them out of all of their, their family's assetts including property, trust funds that they are donor's to, cars, pensions that were paid into when earning from Honister. Then send them to jail.

It is only by enforcing tough sanctions to all persons who hide behind corporate structures to absolve themselves of liability when questionable, greedy practices occur, will we stamp out unethical goings on. Every day we see examples of reckless personal and corporate greed within the wider industry. We may be advising or investing other peoples money, but that's what it is, other peoples money, not our own!

Jail combined with individual bancrupcy is the only answer, but who is listening?

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Stuart Rathbone

Feb 04, 2013 at 13:11

Great gig that AR/network model. The corps is passed from one sycophantic parasite to the next telling you the water is lovely and direct regulation is the dark dark woods until it has been picked clean. It is then jettisoned onto the street for the Kirk to clean up.

‘T was ever thus.

Go direct young man (ladies) with the aid of a good pimp it is no different!

One overbearing uber leach is enough for anyone.

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Sid Cynical

Feb 04, 2013 at 13:11

And the men formerly at the top of Honnister are doing very nicely now at St James Place!

Thank you very much.

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the elephant in the room

Feb 04, 2013 at 13:16

Isn't it great the FSA are there to protect consumers from situations like this!

Well it would be if they did. But they don't.

When a network goes down, the PI insurers run for the hills, the administrators cancel the cover anyway - with no requirement to implement ‘run off cover’, the adviser can continue trading as they are 'apparently' unaccountable if they operated under a network (such as Honister).

Unfortunately the consumers house of last resort - The FSCS - can only pay up to £50K if found in their favour - even if they've lost £500K.

This is the gaping hole in consumer protection the FSA have allowed.

They should be shot at dawn for incompetence!

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Hickky

Feb 04, 2013 at 13:42

Why did Martin Blake, a Barnsley IFA convicted of fraud get a suspended sentance? Why? Because it was his first offence and he would no longer be allowed access to clients money or what? What is to stop him selling useless solar power schemes or home improvements. 2 years in Strangeways would sort him out.

When I see fraudsters get off with suspended sentances it makes my blood boil. Mind you he could be friendly with the Honister directors in jail if I had my own way.

so, you say, he was only convicted for fraudulently stating his solvency to the FSA, and fiddled his books to show them. That is enough for proper jail time.

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Richard via mobile

Feb 04, 2013 at 13:47

@Sid Cynical. At least they're in good company at SJP

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Hickky

Feb 04, 2013 at 14:03

@ Richard

How dare you compare ex the Honister Directors in the same company as SJP!

As you know, one lot are cynical manipulators who use every loophole in the regulations to enhance their personal fortune and the others are.............

Oh yes, I see what you mean now!

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Smithling

Feb 04, 2013 at 14:08

Only 300?

Give it time...

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Shaun F

Feb 04, 2013 at 14:37

24+ years in the business, no complaints to date- am getting properly sick and tired of having likes of FSA as my governing body do you think accountants and solicitors would put up with the like as their governing bodies?

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Hickky

Feb 04, 2013 at 15:40

Shaun

Me too, 24+ yrs and heartily sick of all the corrupt, self centered and inept people in this business, and thats just the regulators! No, I should not have said that now should I, very politically incorrect.

The FCA has one chance to put it right. There is a centralised new office for fraud that takes over from your local constabulary shortly as your locals have not done a good job, too complex for them. The FCA must sweet talk this Fraud Office and make a mutual engagement proposition to ensure the likes of these Honister creeps pay in the long run.

So the FCA must be seen to be able to do something (anything) about this sorry mess. I realise the FSA have been hand wringing about asking us to pick up the FSCS tab, but did they act?

The day I hear that someone senior at a large financial services firm has been sent to jail and been subject to having his assets seized to pay compensationdue to his or her unethical behaviour, is the day I will start to believe in the efacacy of a regulator. At the moment the FSA are producers of 1.4 million lines of regulation that they only use to bash the little guys over the head with. The FCA needs to kick the fraudsters and the unethical where it really hurts, and only jail will do.

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Barman

Feb 04, 2013 at 15:43

Funny to think not six months ago all those articles and comments supporting the Honister advisers getting back into advice quickly. That dammed FSA wouldnt automatically allow the instant bulk transfer of advisers. Maybe there were other issues non of us realised. Oh wait, look there clearly were.

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Chris Miller

Feb 04, 2013 at 15:44

Saw David Attenborogh on the TV the other week: All manner of predators starting a feeding frenzy on a bait - ball of sardines off the coast of South Africa.

Remind you of anything?

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l'ifa passeport en provenance de France

Feb 04, 2013 at 15:45

hickky

but its now all non reg stuff going on. pension liberation etc

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Compliance Officer

Feb 04, 2013 at 15:49

@ Hickky

The day I see someone sent to jail for unethical behaviour is the day I leave the country! There are many different versions of what is ethcial and what is not but I am yet to see ethics enshrined in criminal law.

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Charles Rickards

Feb 04, 2013 at 16:16

As usual the lack of factual information allows us to create an even bigger monster out of a sensationalised headline.

I hope the new regulator will be better than the current regulator and I hope that those who do not act with due care for the benefit of their clients get caught and taken to task. The only way to stamp out under hand behaviour is through truly fair regulation, which has consequences equal or greater than the detriment caused.

I am convinced that the Honister hierarchy knew what was going on and should be fully investigated and sanctioned for any wrong doing.

As far as the FSCS claims, it would be interesting to see how many are genuine and have not been instigated by a Claims Company or some other chancer!

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Tracey

Feb 04, 2013 at 16:16

In January 2102 Honister issued a reassuring statment, following the seperation of Willis Owen and stripping of £6m cash from the company, that "‘As regards the company’s situation….there is no grounds on which the company could be found to be unable to pay (or otherwise discharge) its debts."

This was signed by 4 Honister Directors who have plainly shown they did not have a grasp of this business not its liabilities and action of its ARs. The FSA should suspend all 4 from any further FSA regulated business and activiites until this is investigated properly.

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David IFA

Feb 04, 2013 at 17:10

I agree with you Tracey. These 4 Directors and the Owner of Sage/Honister that went off with £6 million pounds have a lot of questions to answer. The FSA need to act. These people had permissions to be in control of this huge company. The permissins were given to them by the FSA to act with Honesty and Integrity(to use their own words) Where the hell are they!!

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james Clancy via mobile

Feb 04, 2013 at 20:48

The only way that you are going to stop this unethical behaviour. Is tp make everyone personally responsible for their own actioions and have personal guarantee if they are llp or ltd companies

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Dante

Feb 05, 2013 at 09:33

The same 4 or 5 directors are now encouraging the very ARs and RIs they let down to join Beaufort or SJP....

So the environment was created in which the AR/RI suffered and before the dust had settled the management team had pre-agreed a cosy,self serving introducer arrangement with a new business.

Agree with all above; Why is the chronology of events not examined ?

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Hickky

Feb 05, 2013 at 10:03

Dante

Maybe someone who wants to make a name for themselves in regulation will read your comment and do something! For too long the outgoing FSA has dithered and worried about its own position rather than do what it is supposed to do, regulate. Regulation does not just mean setting rules and fining transgressors. It means stamping out dodgy practices, unearthing manipulators, making an ethical stance.

Why these directors still hold permissions to supervise and advise is beyond me, just as it is that SJP would even employ them in the first place. Have they no shame?

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Bob Donaldson

Feb 05, 2013 at 10:08

The constant thread through all of citywire over the last twelve months is that our industry still has a number of problems with the advice being given. It is for want of a better term a mess.

Whether the blame lies for this at the advisors door or the FSA is irrelevant. It is the same old song that keeps getting chanted claim after claim after claim.

However I do believe that if you give people a right to claim which costs them nothing then they will all come out of the woodwork with their selective memories.

The advisor community should be brave and turn some of the potential clients away that want to 'walk on the wild side' with their investments. It seems to me that they only lead to grief down the road and for the sake of a few quid now, you end up with major problems and potential losses down the road.

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Hickky

Feb 05, 2013 at 10:20

Bob

I agree with you. If someone wants me to advise on 'getting ritch quick' schemes, I will tell them I cannot help. If someone wishes high risk, I really enquire 'why'? It is normally because they have not told me something or are desparate. Do they have the capacity to take that risk? How will they feel if the scheme does not work? Do more questioning, not less. If you feel it is not right in your bones, turn them away!

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Luxemburg3r

Feb 05, 2013 at 12:40

It seems a lot of the claims result from the mis-sale of UCIS, some of which offered leveraged commissions. Many of the mis-sale of UCIS occurred because advisers tried to side step the rules or simply did not understand the rules. The FSA would do well to remove from the industry corrupt and stupid advisers.

When investors are directly affected by or read these stories on top of the PPI and LIBOR scandals, plus countless other scandals over the past couple of decades, is it any wonder investors do not trust financial advisers, whether restricted or independent?

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Tracey

Feb 05, 2013 at 14:06

But if these Burns Anderson / Honister advisers sold UCIS for large commissions these could surely only be payable to their parent company Honsiter ? Which means that Honsiter should have been monitoring these significant incomes coming in and raising compliance questions about them ?or where they just happy to take their % cut so they could post a profit.

I understand some of these Directors are at SJP and other IFA networks, surely their respective shareholders must be asking questions about their fit and properness ?

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From yet another cynic

Feb 08, 2013 at 16:28

I am astonished it is not far more. Re the PII, from my experience I believe Honister have been rejecting valid complaints for more than 3 years.

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From yet another cynic

Feb 08, 2013 at 16:28

I am astonished it is not far more. Re the PII, from my experience I believe Honister have been rejecting valid complaints for more than 3 years.

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From yet another cynic

Feb 08, 2013 at 16:36

I believe I have evidence that the FSA did not police Honister effectively for a number of years i am waiting for an explanation why . I am also waiting for the FSA to explain why Honister found it necessay to report to them when a complaint was passed to FOS

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The ssinnic

Feb 09, 2013 at 11:05

from the real SSINNIC...methinks PII insurers are able to pick and choose whetehr to admit claims like this as they please beacause no IFA will dare to fight their decisions! Tha's what meknows as well!

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