Around the turn of the millennium I sat in a hall at the Leeds Armouries listening to a senior Misys executive lecturing DBS members on how the network model was the only future. He posited that the regulator did not want small directly authorised firms cluttering up the landscape “thinking they can fly below the radar”. Fifteen years on, the small firm model has suffered all the slings and arrows of outrageous regulation yet despite it all is looking surprisingly healthy. DBS, however, became Sesame. Some say the network model is dead. The networks obviously disagree. Network membership is not for me but if they can survive and thrive then good luck to them. What I cannot get my head around is the pointless posturing and blatant falsehoods parroted about networks by individuals who were, until recently, members of Apfa’s governing council.
Two main myths are propagated. The first is that the networks call all the shots and the rest of the council have to like it or lump it. I have served on Apfa’s council for nearly five years now and can categorically state this is simply not true. Not once in five years has there been a split vote on any issue we have debated. Not once have the small and medium sized firm representatives ever been put under pressure to fall into line behind any network’s stance. On the contrary: the small firms have succeeded more than once in pulling the networks onto their side of the argument, most notably in the recent debate over capital adequacy.
The other myth is that Apfa, as one former council member declared with hilarious pomposity, had “betrayed IFAs’ birthright” when it agreed to accept restricted firms. This argument confuses the competition with the enemy. The enemy is bad, expensive, unrealistic and unaccountable regulation. The enemy is the gullibility of the Financial Ombudsman Service and its propensity to stuff claimants’ mouths with other people’s money. The enemy is a compensation scheme that does likewise. Restricted firms are just competition. Those who worry about them being represented by Apfa need to stop whining and concentrate on being better businessmen.
So what is the reality? No honest person would deny the departure of Sesame and Openwork has impacted negatively on Apfa’s finances. But while the former was inevitable the latter will, I believe, prove to be a mistake. If any firm thinks it can have more clout lobbying solely in its own interests than Apfa can when lobbying for the whole industry then it is deluded.
So, where now for Apfa? I believe small firms, in or out of networks, are the sustainable future of both the industry and Apfa. The networks accepted long ago their members could join Apfa direct and be represented via the small firms’ constituency. If enough join, the small firm representatives will swamp the networks anyway. However, one thing above all is clear to me: if Apfa in its present form did not exist then we would need to invent it. Garry Heath and his supporters would say he has. Sadly, in that regard, they are also among the ranks of the deluded.
Neil Liversidge is managing director of West Riding Personal Financial Solutions