Advisers are fearing further increases in network fees after two of the industry’s most prominent groups hiked costs, while a rival warns further “stealth taxes” are also possible.
Intrinsic announced last week it will increase fees following an “unprecedented” rise in its Financial Services Compensation Scheme levy. The network told members it faced a bill of £5.5m, almost £3m more than it had expected.
Around half the cost of the increase is expected to be passed on to appointed representatives.
Independent advisers will see a £12 a week increase to £123.92, restricted advisers will pay £10.50 more a week to £88.73 and mortgage and protection advisers will pay an additional £9.80 per week to £48.80.
Separately, Tenet announced earlier this month it would begin to charge members of its investment and pensions division TenetConnect £150 to carry out file checks on drawdown cases.
Advisers will be able to avoid the charge if they submit to a series of Tenet-devised case studies, after which point they will not have to have cases signed off by a specialist.
Derbyshire Booth managing director Greg Heath says advisers are beginning to question the benefits of the network model in the face of rising costs.
On the Tenet charge, Heath says: “If you do a lot of cases in these areas, then that can easily become a significant push on your costs overall.
“Other networks will start to increase their costs as well, and with all this extra bureaucracy that’s been created by pension freedom you can see why people are starting to think they might be better off going directly authorised. I know a few who have done it who say it’s the best thing they’ve ever done. It’s a lot more work, but they get to choose what services they need and find what suits them.”
Threesixty managing director Phil Young describes Tenet’s £150 bill as a “stealth tax” that is likely to become more common as networks try to keep costs down.
“In the old days, networks used to charge basically a flat rate of around 25 per cent of revenue.
“But because it’s so price-sensitive competing for network advisers, we’ve seen a few cut that down to what might look like about 5 per cent and then bring in some stealth taxes along the way.”
Yellowtail Financial Planning managing director Dennis Hall says advisers are likely to find their network bills will continue to increase.
He says: “These costs will continue to creep up until they either become uneconomic and people start to think the model is broken.”
Hall says advisers are increasingly questioning the value of the remaining as a network member.
He says: “Historically you might join to get a better commission deal or even professional indemnity, but for the better players out there you have to think you could be doing it cheaper by yourself.”
Swallow Financial Planning Andrew Swallow says: “The network model is a dinosaur structure and its time is no more. I can see some consolidators still proving attractive to advisers, and even some service providers, but the days of the one-man-band insurance salesman that used to drive these networks are now gone.”