Networks and nationals are struggling, with no apparent end to the suffering. Record fines, management team departures, falling adviser numbers and a furious backlash against the inevitable conversion to a restricted advice model summarises a horrendous 2013.
In the historic environment of the “solutions led” adviser, networks once offered valuable services, particularly their ability to secure enhanced commission for smaller firms.
But in their willingness to cater for any adviser, networks have been accused of over-managing firms. Compliance frequently catered to the networks’ weakest appointed representatives and as these checks often failed, the networks have further tightened their “business prevention” nooses.
Last year was broadly favourable for medium-sized, directly-authorised firms, such as our firm. I can confidently assert that we were among the first firms to offer a financial planning service for customer agreed fees and we reached the beginning of 2013 with the business flourishing.
With a common vision and a co-operative approach we could not be more different to the “rainmaking” activity encouraged within networks and nationals.
The fallacy that the pie is only so large and that each individual must fight for scraps is challenged further by the FCA’s stance on remuneration and inducements. It is just over a week since it issued FG14/1, its final guidance on provider inducements, which criticised behaviour that could be in conflict with the RDR regulations introduced in 2013.
In the same document, the FCA expressed a strong dislike for multi-year agreements governing distribution, overseas conference and other soft benefits unless the purpose is for an ultimate client benefit.
Time will exacerbate these issues, with mid-sized , directly-authorised firms thriving.
Tying to a limited number of larger providers has several benefits to the nationals and networks, not least the reduction of risk as the number of available solutions diminishes. Of course, this is no panacea as the single-tied and vertically integrated firms have seen – especially the banks, which also have been deluged with complaints and fines.
The service provided will need to be slick and heavily IT-driven. It can be anticipated that to drive a return in a world of more transparent, falling commission, a higher volume of clients must be serviced, each with a lower value. I must confess that my knowledge is anecdotal but IT seems to be an area in which a significant number of larger firms are lacking.
In contrast, medium-sized firms will continue to move up; providing a more intensive, often bespoke service. For the smallest of firms there will be no autonomy, as they are faced with the option of confederacy with a restricted network or needing to join or buddy with other firms if they wish to remain independent.
Alistair Cunningham is financial planning director at Wingate Financial Planning