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Inside edge

Money Marketing recently reported that the FSA is questioning IFAs on the role of networks, so it is very timely to remind people of the important role of networks in supporting advisers.

As each month passes, further regulatory change emerges on the horizon. Keeping up with developments seems to be a full-time job in itself, which, of course, it is for a team of people within Sesame, who keep members abreast of changes taking place and provide guidance on adapting their businesses.

A network gives its members the comfort of knowing that they are trading in a compliant manner, without fear of falling foul of current or future FSA rules and regulations.

Over the next 18 months, further changes will see the FSA commence the regulation of mortgages and non-investment business. In addition, there will be changes to product disclosure.

This constant change can distract firms from doing what they do best – advising their clients. This is one reason why being part of a high-quality network can help firms run really successful businesses. Indeed, it may help to demonstrate why recent research has indicated that the popularity of networks is increasing Membership brings many other benefits, such as enabling firms to benefit from improved service and industry-leading products with leading allocation rates and enhanced commission terms from product providers. Networks with greater scale and weight in the market are more likely to be able to negotiate greater enhancements in these key areas.

Networks provide access to high-quality training and give advisers a simple and efficient way of demonstrating to the FSA that they have maintained their industry knowledge. Our research shows that, along with commission handling, these core services are most valued by members.

A network should also be able to provide technology to help members work more efficiently and a research department providing up-to-date and relevant information, including risk analysis of products to help IFAs select from quality products with no hidden surprises. There is also access to additional products and services to maximise members&#39 incomes, assistance with the recruitment of additional advisers and a route to retirement. Membership also allows firms to keep the ownership of their clients. In other words, members work for themselves.

Scale and security are more important than ever before. Being part of a network with a loud voice is preferable to being a solitary voice in the wilderness. It is this clout that, for example, allows a network to obtain comprehensive PI insurance at a discount on behalf of its members. Since 2001, the PI marketplace has contracted to such a point that it has become difficult for some firms to obtain FSA-approved cover and, in some cases, any cover at all. Where cover can be found, it has often been at a much higher cost with much higher excesses.

Of course, there are a wide variety of networks and, in the same way that IFAs consider the financial strength and strategy of product providers when advising their clients, the same thought should also be given to networks. It is important that a network has financial strength so that its members are safe in the knowledge that the network will be there for years to come.

The changing environment we find ourselves in presents us all with threats and opportunities. Networks have proved their worth in the past and must continue to evolve to deliver the benefits that members deserve and expect. I believe that networks are up to the challenge and, in an increasingly compliant culture, continue to look after members&#39 interests by helping to build the capital value of their firms through the writing of good quality business.

Steve Pearson is managing director of Sesame


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