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Tenet administration aftermath shows ‘supportive industry’ but questions remain – analysis

  • 12/06/2024
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Tenet administration aftermath shows ‘supportive industry’ but questions remain – analysis
Select Tenet Group entities going into administration last week has lead to an outpouring of support for those affected, but has also raised questions about mortgage network models and the pros and cons of appointed representatives (ARs) versus directly appointed (DA).

Last week, it was announced that select Tenet Group entities would go into administration, with 95 redundancies.

Mortgage Solutions understands that 36 financial advisers of Tenet Mortgage Solutions and Tenet Financial Services are affected.

However, more than 250 financial advisers have been successfully transferred out of Tenet Group over the last year, including all third-party financial advisers.

Tenet Group completed a strategic review of its business last year, with The Openwork Partnership and LSL Property Services taking its wealth and investment network and TenetLime respectively.

Richard Howells, LSL’s group managing director for financial services, said: “As has been widely reported, Tenet Group and three of its subsidiary companies called in administrators and shut down some parts of their business.

“For clarity, we would like to reiterate that TenetLime and all member firms that transferred to LSL as part of the acquisition in February are unaffected.”

In the days following, several posts on LinkedIn of former advisers who were made redundant say that the move happened with “no warning” and apologised to new and existing customers, saying that it was not within their control.

Firms like Just Mortgages, SimplyBiz, Stonebridge, JLM and Mortgage Advice Bureau (MAB), to name a few, have also come up with posts of support for those affected, encouraging them to get in touch for opportunities.

Smaller brokers firms also posted their support, along with several mortgage specialist recruiters.

Karl Wilkinson, CEO of Access Financial Services, said: “Tenet’s winding-down was meant to be controlled, so the announcement certainly sent shockwaves.

“It’s been extremely encouraging, though, to see how swiftly the industry has rallied around and offered jobs to staff and brokers. Ours is a truly great, supportive industry.

“Unfortunately, it does also show the brittleness of some of these large firms, how important it is to avoid complacency when dealing with self-employed brokers, and how tight margins are for mortgage networks. Financial control is key.

“I get a strong sense that eyes and ears are open, with some speculation on whether there are other mortgage networks in a similar situation.

“When times are tough, a self-employed model for mortgage brokers can really help both firms and brokers alike, with the added bonus of brokers securing a higher commission rate.”


‘Unless networks change, they will not be the last’

Sebastian Murphy, group director at JLM Mortgage Network, said that the recent closure of Tenet was the “pinnacle of a number of poor decisions”, and is a “stark warning” of how the mortgage network model “must be about value, rather than a race to the bottom on fees”.

He explained: “There were a number of poor decisions. The kudos of being able to offer their own platform perhaps eclipsed any worries regarding the fact that there was little experience in the group of doing so.

“Then, in 2019, there was the disastrous launch of Intelliflo to the mortgage network, which whilst a well-regarded system in the wealth sphere […] did not deliver what Tenet’s mortgage firms needed.

“Firms complained that it was clunky, hard to use, and that inadequate training was offered. Most tellingly, firms said that they could not see why it was needed or added value. Tellingly, around 100 firms left over the next 12 months.”

Murphy said that Tenet’s closure showed that mortgage networks need to have three things to be successful.

He said: “Firstly, it needs to be profitable. Network fees must represent the liabilities that the network is taking on and it is hard to see how fees sub-10% work. Saving a few hundred pounds to then have your network close is almost the definition of a false economy.

“Secondly, a network needs to listen to its AR firms and bring in systems that genuinely help them to do more business and engage with them regarding change and the rationale for it.

“The relationship must be truly collaborative, and a network where the owners still sign business themselves, rather than a management team of chartered accountants, is likely to understand a broker’s needs better.

“Finally, small is beautiful. Rather than the consolidation of the last few years, a larger number of smaller networks, each with their own USPs, is a far better solution than huge, faceless organisations, trying to be all things to all men, with external shareholders and no clear direction, where an AR really is a number rather than a valued part of the team.

“Tenet’s closure follows a long line of closures, with names such as Sesame, Sanlam and Tavistock preceding them. Unless networks change, they will not be the last.”


Tenet administration sparking broker debate around AR vs DA

Paul Day, founder and director of Network Consulting Services, said that for the staff and advisers impacted by Tenet going into administration, it is “truly awful”.

“Many of the advisers have contacted me directly and were completely shocked by the announcement, many of whom saw it in the press or were told by recruiters of the news before they received any correspondence from Tenet themselves,” he said.

Day said that the group infrastructure could be supported by the income from the remaining entities, following the sale of its wealth and investment network to Openwork and TenetLime to LSL Property Services, so “large-scale redundancies were going to be on the cards at the very least”.

“Although, if you’d have asked me three weeks ago: ‘Would the Tenet Group go into administration?’ I would have said no. However, when the sale of Tenet and You to My Pension Expert was announced at the end of May, and from what I understand, a few hundred million of funds under management went with them, then I felt something larger was afoot.

“With all remaining advisory practices [that] were owned by Tenet Group either gone or set to go into Openwork, it only left Tenet Compliance Services generating any income,” he noted.

Day said that Tenet going into administration had sparked discussions on adviser forums weighing up the network model versus going DA, with some saying that the “network model is broken”.

He said: “Going DA is not the answer for everyone, it would fit some practices but not all. The network model is invaluable within the industry, offering advisers and firms a platform and support to run their firms well in a regulated environment.

“For many years, it has been cited that the FCA do not wish to have a fragmented market with lots of smaller DA firms to monitor. Whether this is true or not, only the regulator can tell you.”

Day said that he didn’t believe that Tenet going into administration would have a “profound impact in the marketplace or longer-term repercussions”.

He continued: “However, the FCA may look more closely at network financials, particularly if they are being supported by large-scale investing shareholders. Equally, advisers may apply more scrutiny before joining a network, which they should anyway. Doing your own due diligence before committing is imperative; choosing a network can be difficult and should be viewed as a long-term partnership.

“Networks exist because of advisers, not the other way round, and they should remember this. They must listen to and look after their advisers and their clients or advisers leave, and with them, their income.”


If you have been impacted by Tenet going into administration, please get in touch. 

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