If there is one thing we have learned in the past 12 months it is that we all need the comfort of knowing that there is support around us when we need it. Support comes in many ways and might, for some, be as simple as knowing there is a business partner who appreciates the challenges that an adviser is experiencing, can help when needed, and keeps communicating key messages both technical and personal.
Since networks were born out of regulation in 2004, they became a refuge for the mortgage and protection firm which didn’t want to be involved in the regulatory changes implemented by the then Financial Services Authority. Advisers sought regulatory shelter and networks used this opportunity to consolidate distribution to negotiate commercial arrangements with lenders and insurers. Over the years, networks have grown and now deliver over 50% of mortgage and insurance distribution in the UK and have developed their offering to extend a wide range of services, some of which are neither available nor affordable elsewhere.
More recently, the value of the network proposition has grown with the challenges around securing reasonably priced professional indemnity insurance and the impact of cost increases in the Financial Services Compensation Scheme. Where the typical directly authorised (DA) firm may be shocked by the increases in upfront costs, in a network world these increases in costs can be accommodated in the ‘pay as you go’ pricing that most operate, which in turn mitigates the impact of an unexpected invoice dropping on the doormat. The ability to spread significant costs across the many really helps the few. Adviser firms outside networks may query how they are priced and wonder what they do for their money, but it is at times like these when successfully run networks come into their own and help firms continue to trade.
Of course, for most adviser firms, investment in technology is a key driver for their businesses. Whether it is for mortgage and insurance sourcing, CRM systems or research tools, identifying and implementing a system, or indeed systems, can be expensive both from a time and a financial perspective. In some ways, the implementation of a comprehensive technology platform for a network is a direct result of regulation – the requirement for a set of common advice guidelines, consistent fact-finding and understandable customer outcomes has driven the need for investment in solutions which minimise risk of poor advice for the adviser, and risk of poor customer outcomes for the network. Identifying the right technology solutions and implementing the integrations to enhance the customer experience, benefit both the network and the adviser. The higher levels of investment the network can make in its infrastructure, the greater the efficiency of the adviser, which in turn leads to a higher level of customer satisfaction – a virtuous circle.
Networks have had the time and resource to identify the right systems, customise where necessary and then, because of their user numbers, ensure integrations with third party systems to create a unique platform designed specifically for their membership. Compare this proposition to simply buying an off-the-shelf package.
Speaking of regulation, which adviser firm that doesn’t have dedicated compliance can really implement a vulnerable customer policy, whilst meeting the demands of the Senior Managers Regime and truly assessing the quality of their advice with full file checks and outcome analysis?
When we look at the demands on DA firms, the evidence that is now required by the FCA to prove that they are following their rules and indeed managing the risks we run every day from an ever more litigious population, whilst trying to meet their ever higher expectations, it is easy to see why a network offers a viable solution. Whilst many will understandably argue that independence is valuable, for those in the network model, partnering with a network dedicated to supporting its members and offers a genuine balance between monitoring and freedom, can create a mutually beneficial relationship which enables both businesses to thrive.
Lastly, lenders and insurers, recognising the value of working through networks with their professional adviser base backed by coherent compliance and support systems, tend to reward networks with higher remuneration levels, which also clearly benefits everyone.
In summary, it is no surprise that the network model continues to thrive. The continued uncertainty and cost of regulatory change, risk, higher customer expectations, investment in technology and the need not to feel alone in what is a very people orientated industry, all contribute to seeing the network route as a highly attractive proposition for adviser firms, enabling them to concentrate fully on building their businesses.