Sesame reveals adviser impact of network closure

Sesame Bankhall Group has revealed what member firms have chosen to do following the closure of the distributor’s investment advice network.

In March, SBG announced it would no longer operate a network for investment advisers. Appointed representatives were given the choice of going directly authorised and buying support services through Bankhall, moving to SBG’s “preferred network partner” Intrinsic, or leaving the network altogether.

Firms were given three months contractual notice to make a decision on their chosen route by 31 July.

SBG has now released estimated numbers on member firms’ intentions. As some firms are waiting to be reauthorised, final numbers are expected at the end of August.

Out of a total of 350 member firms, 150 have decided to move to Intrinsic. Some 105 firms are going DA with support from Bankhall, and 55 are either leaving to go to another network or leaving the industry.

The remaining 40 firms have decided to reduce their regulatory permissions and will become part of Sesame’s mortgage and general insurance arm.

Based on the value of advice firms and total turnover, Bankhall has emerged as the preferred route.

Some firms that initially opted to go DA were encouraged to find a network partner instead.

The restructured SBG business will house around 1,000 mortgage brokers and aims to build on its DA proposition through Bankhall.

Speaking to Fundweb sister publication Money Marketing, SBG executive chairman John Cowan says Intrinsic was chosen as its network partner due to the fit between the two firms.

He says: “We thought Intrinsic’s strategy was much more focused within the wealth space, which is in line with its parent Old Mutual Wealth’s wider investment strategy. The fact that Intrinsic was already a restricted network also played a role. Ultimately, this was driven by wanting to secure an orderly transition of our investment advisers.”

Cowan admits there is a commercial agreement in place backing the network partnership, but did not disclose the terms of the deal.

Liabilities and “pressure tactics”

It emerged last month that Aviva and Friends Life, which owns Sesame, has pledged £45m that Sesame can draw upon over the next two years to cover potential liability and restructuring costs.

Cowan says: “We are absolutely committed to getting this business up and running profitably, so that financial resource is there to support us. We don’t see it as a fund for us to spend as we like. Once we have got the restructure behind us, we believe we can make a significant profit.”

In terms of what issues the liabilities relate to, Cowan says: “There is a project that we are working through at the moment, that is an enforcement issue related to pension transfers. Running an advice firm you never know what is going to come out of the woodwork so that fund is sitting there to support the business.”

He says although there was a lot of clamour around saving the Sesame Financial Adviser School, this turned out to be “noise” and no-one has come forward to secure the school’s future.

Cowan dismisses claims that SBG applied “pressure tactics” in getting members to choose its preferred routes of either support services from Bankhall or moving to Intrinsic.

Firms choosing either route were offered benefits such as SBG paying Financial Services Compensation Scheme interim levies, not freezing commission accounts, and giving firms up to six months to return client files.

But Cowan says: “Members had one month to think about what the move meant for them. When we then announced Intrinsic as our network partner firms had a further three months to decide what to do.

“There has been no pressure tactics at all. Advisers had the choice between Intrinsic and Bankhall or going elsewhere. That choice was completely free to them and there was no financial incentive.”