Recent incidents show networks may have to shape up if they are to hold on to their position of power in the IFA market.
The decision by Misys to reassess the 3,300-strong IFA membership of three of its networks, Kestrel, Countrywide and Financial Options, at a cost of £350,000 is adding to growing criticism of networks.
A letter obtained by Money Marketing last week revealed that recent visits by the PIA to Misys members uncovered evidence to suggest not all members were meeting the required training and competence standards.
This incident begs the question of whether networks are meeting obligations in members' contracts. IFAs, trade bodies and networks themselves have views on what the networks are doing right, where they are going astray and what they have to do to keep the support of the IFA community.
LIA public affairs director John Ellis believes Misys
generally provides a good back-up service to members but something may have slipped through the net. He says the onus is increasingly on IFAs and networks to meet regulation standards but they do not have to do it alone as trade bodies such as the LIA can help.
Other commentators say networks have undoubtedly been put under increased pressure and are being forced to cope with a fast-changing regulatory environment. They are being faced with increased rules, new T&C requirements, the potential unravelling of polarisation, stakeholder and Cat-standard products.
But others feel the networks only have themselves to blame, accusing them of concentrating on growing their membership, overstretching resources and letting their service slip to existing members.
DBS network managing director Alan Taylor says of the Misys incident: “This is a sign of the regulator taking training and compliance seriously.” He links it to changes the FSA is proposing to T&C to make it less prescriptive and give networks more responsibility to meet standards.
Another issue in this increasingly challenging environment is the threat the more traditional networks face from new technology-focused organisations such as In-Partnership and Positive Solutions.
In-Partnership chairman Stanley Lovell is a former chief executive of Kestrel and chairman of the M&E Network. He claims to have a “partnership” philosophy rather than one of “them and us” such as the more traditional networks.
Another player aiming to compete with traditional networks is Sun Life Financial of Canada, which is launching its Host Network in the spring. As well as providing usual network services, it will also have a consultancy division offering ad-hoc business support to IFAs.
Host managing director Trevor Newham, who was a founding director of IFA Network, says an important market will be IFAs who have had enough of networks and are going to the PIA to be directly regulated.
In the longer term, Newham is looking to establish Host as a brand name the public will recognise. A big brand name is what some feel is missing from the market.
But Misys head of marketing Andrew Bedford says: “New entrants and competition are good. We plan to aggregate better terminology for members through the power of Misys. We will maintain the best products and best remuneration deals for members.”
Woolwich director of IFA operations Dawn Johnson says the backing of a good national brand which does not detract from an IFA's national identity would let IFAs concentrate on their core business.
Fergus Mackenzie, a partner at M&M Financial Advisers in Bishops Stortford and member of DBS, welcomes the idea of a strong network brand being developed. He says he had the impression two to three years ago that DBS was pushing its name but feels this has not yet materialised.
How is the future of networks shaping up? If they are to keep their place in the IFA market, networks will be forced to change over the coming years as they embrace the changes to the regulatory regime.
They are likely to remain a vital necessity for many IFAs, especially smaller ones. But, as the situation Misys faces illustrates, they cannot afford to rest on their laurels.