Networks have been established for a long time within financial services in the UK. Their main attraction is that they provide an umbrella for advisers who want help with administration and guidance on how to conduct business.
Because of their size, networks have been able to obtain better commission rates from providers and also exclusive deals for mortgages and other products.
Networks offer the ideal of allowing advisers to advise within an easy structured process. The network should have whole departments with expertise that could never be achieved by individual advisers.
Due to their size, they should also have direct contact with regulators and have the resources to help advisers keep up-to-date with market developments and any changes in legislation or interpretation of the regulators’ requirements.
One of the problems with networks over the years has been the need to grow to achieve critical mass to have some clout in the market and to maintain profitability. This need to grow has often led to the recruitment of advisers without undertaking sufficient due diligence to ensure a high caliber of staff.
Traditionally, the yardstick of a good adviser for a network was an adviser who could write a lot of business and be profitable to the network. Indeed, those people were feted year after year with awards and “conferences” in exotic places.
This rush towards numbers was often at the expense of quality. With quality being measured as business providing a good outcome for clients. In “the good old days” advisers could go out to sell products without necessarily considering whether the product was right for the client: “This product is the answer, what is the question?”
With minimal fact-finding “on the back of a fag packet” and somebody else clearing up after them trying to piece together some kind of file to show to compliance. Rather than advisers, these were simply super salesmen.
Total number of networks, UK: 2010 to 2016
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The compliance departments within the networks were see as a non-profit making part of the business. The department would often be referred to as a “business prevention unit” because they would be picking up issues and the advisers would be diverted from selling in order to address the issues raised.
Invariably, the compliance departments would be under resourced to undertake the volume of work that was required.
Even now, dealing with advisers is like trying to herd cats. The average adviser wants to take the shortest possible route to completing a sale. The paperwork is simply a means to an end for them being paid. Strangely, remarkably few advisers wake up to the fact that if they do the paperwork correctly the first time, they save themselves time that is later wasted on remedial work.
Due to the nature of networks, there is some distance between the network and the advisers. An adviser is likely to work for an appointed representative (AR) firm within the network.
