Since the Financial Services Act of 1986, networks have proved a successful model through which to conduct business. However, 2004 has been one of the most difficult years for networks as Interlink Premier, Lifeboat and Group 300 would no doubt testify. But the model is as successful today as it has been for the last 15 years, the problem for IFAs is identifying the successful ones.Choosing the right networkIn a recent article, John Ellis, LIA head of public affairs, advised IFAs to carry out better due diligence when joining a network, stick with well-established ones, and be wary of fringe operators who come into the market without the resources to carry on. Sound advice, but many IFAs simply look at cost. But the cheapest is not always the best. As Ellis says, better due diligence could avoid several expensive business moves from one “cheap” service provider to the next. Choosing the right network first time will prove the most cost-effective choice in the long term. Getting the information to make the right choice can be difficult. IFAs should access the company’s accounts, look at the financial stability, review the assets, determine the experience and success of the management team, size of the operation and how long the network has been established. While there are many networks teetering on insolvency, there have been failures in every sector of our business, service providers, mortgage networks, and IFAs themselves. The choice isn’t easy, but there are many well-established, well-run networks with experienced and successful management teams. Value For MoneyOnce you have sourced the “winners”, the real choice for IFAs is value for money. Are the services and support worth the cost?Ellis said: “He wouldn’t want to be under the umbrella of a network. People don’t get enough out of it to compensate for the problems of being in someone else’s pocket”. This is looking at the issue from one angle – the failure of a network doesn’t take into consideration the invaluable support and services that a sound one provides. A survey by Henry Samuels shows that while network members have a high volume of services provided as part of their network package, directly authorised IFAs either buy them in or are obliged to try to produce them in-house. While network members generally have their services provided by their network, their direct colleagues either paid extra to buy them in, were responsible for their own in-house sourcing or worst of all, do without. These services include:Research and best adviceComplianceInterpretation of FSA bulletinsT&CRegular auditsTechnical supportProduct supportAs Stanley Lovell said in his letter (Money Marketing November 18): “If Ellis were an IFA he would find that compliance and other regulatory burdens would reduce the time he had available to advise clients and increase his administrative burden accordingly”. Networks provide a unique and successful way to overcome these burdens and free the IFA to concentrate on their job of seeing the clients and increasing their income, leaving the regulatory burden to the network. Additional BenefitsWhile networks are generally regarded as a “safe haven”, providing an umbrella for the regulatory requirements of being an IFA – networks provide much more than just regulatory support:IT and website supportEnhanced commission ratesCommission collection and administrationClaims and complaints handlingRecruitment vetting for employeesTechnical updatesRegional meetings, sounding boards and industry newsBusiness developmentNetwork members retain their independence, company name, and clients. Value is added to network firms because networks provide IFAs with skills to help them create more wealth for their clients, reduce the time it takes to deal with compliance and the regulatory burden and provide additional input which helps IFAs expand their businesses, find new clients and market their company more effectively. The FutureFinancial Services have evolved and changed radically over the last 15 years and will continue to do so. Networks will continue to play an essential role in the future. They form an invaluable element in the distribution channel for IFAs. John Hayden is business development director of Burns-Anderson Independent Network
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