The comments made by our colleagues at Sesame and Bankhall regarding their predictions that smaller networks will not survive nor have the scale to multi-tie were very intriguing to say the least and demonstrate the depth of self-delusion and complacency inherent in certain parts of our industry.
A parallel example of such business myopia can be found in the airline industry where traditional airlines thought the “smaller players” such as Ryan Air and Easyjet models would not work. We all know it was the bigger players which almost went to the wall and even now continue to suffer.
Mint agrees with the anecdotal evidence that poor business models, irrespective of the size of the organisation that worked in the 1980s and 1990s are no longer viable in the current climate as the landscape in which we work has changed and will continue to change. Such models will not work in the future either simply by wallpapering the cracks that exist within such models or through amalgamation or the juxtaposition of inefficient models.
Networks with poor and unprofitable business models that haemorrhage cash, irrespective of size or scale, will continue to struggle, and are unlikely to survive. Conversely, the forward-thinking network with greater efficiency and structure built around the use of technology and profitable business models will most certainly thrive.
Change is here to stay, and the more adaptable and market sensitive the model the easier it will be not only to evolve with the environment but also to play a leading role in shaping the future of our great industry. More irony on size is that, over the next two years, Mint will itself become a bigger player, growing organically while looking to acquire the smaller IFA with a less than economical business model, and a desire to use end to end technology to enhance business value.
What we are trying to say is that a smaller network must have the desire to survive, have a robust model and be willing to have pinpoint sensory acuity. A smaller network will be able to adapt its model relatively easily if it has the desire to take intelligent action at the appropriate times.
At Mint, we have had the unique opportunity to observe the past mistakes of larger networks and have devised a model based on profitability through effective use of technology and not on ego or wastefulness of resources.
In Mint's first full year of trading (December 2003), it made a healthy profit. Our offer to our members is based on sustainable ecommerce and support of that platform.
I read with astonishment in last week's edition that Bankhall actually finds it a marketing advantage to announce spending “significantly in excess” of £9.8m on technology.
The reality is that technology solutions can be relatively inexpensive if sufficient thought goes into what you want to achieve and a planned methodical approach is adopted. We have a technology team that work around the clock on support, programming and development work.
From its own investigations, Mint disagrees that the true IFA appointed representative, given the choice, will want a multi-tie proposition at all, and so Mint's focus (and that of its ARs) will remain on true independence.
Most IFAs' view is that multi-ties should be left to the banks and currently tied organisations. The whole objective of multi-tie is to effect the better distribution of products and services to the consumer from the sources that currently are unable to deliver more than one provider's products.
Mint's view is that some larger networks see multi-tie as a way to exploit the depolarisation rules in order to pitch one provider against another for additional commission while undermining the benefits of independent financial advice.
All consumer groups should be afforded the benefit of independent advice, and migration from IFA smacks of discrimination.
Both Sesame and Bankhall appear to have neglected the fact that the member IFA firms are the most important factor in their business equation – Mint is able to deliver a prompt and efficient service through the effective use of technology, which can and will continue irrespective of the growth in member numbers.
We have sound professional indemnity cover in place and have had favourable reviews both from an external risk assessment company and the FSA.
One of the aspects of size that is assumed is that the level of commission that a smaller network can command with product providers is lower than with a bigger organisation. This myth is nonsense if you have the right business model in place, valuable connections at higher levels and the belief from the providers that accelerated, ethical and sustainable growth is attainable.
Paul Gains is chief executive at Mint Financial Services