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Network handbags at dawn

I have recently watched and partaken in a lively debate on IFAs use of Social Media on the superb IFA networking site  What intrigued me was how quickly the original and core topic disintegrated into the usual ‘network bashing’ dialogue.

Let me be clear up front, I am the managing director of an IFA network as part of an AIM listed financial services group… and here comes the shocking bit for some …. I am very proud to be so! 

It intrigues me when so frequently I witness  how willing, keen even, we are to take ‘pot shots’ at alternative business models within our own industry / profession / sector.  To me this self-destruction appears unique to us as a sector.  Personally I cannot recall the last time I heard one accountant criticising another?  Likewise try complaining about a solicitor or barristers chambers and watch the barricades come up as the profession quickly unite against ‘the outside world’.

If you believed some, networks are only full of commission hungry crooks and charlatans and that if you want quality advice you must seek out your small local directly authorised IFA as the only sensible choice.  So why do we find ourselves in this position?

Well we cannot escape the reality of some significant, high-profile and catastrophic failures as well as FSA sanctions and the inevitable reputational damage to the ‘network’ model this results in.  However, if these failures are examined in detail both from a financial and regulatory perspective they almost entirely come down to crass mismanagement of the network model not the network model itself. 

So conversely are all small directly authorised IFA business well run, highly qualified and experienced?  I am afraid not … I receive enough approaches on a weekly basis from these firms looking for an exit to know the truth.  The same aspects of poor management whether they relate to; under-capitalisation, under resourcing or less than robust compliance could also be levied at many small directly authorised businesses.

Does that mean that networks get everything right?  Most certainly not.  Does it mean all network advisers and firms are personally well funded chartered financial planners? Again no.  However, equally, are they all initial commission hungry ‘churn and burn’ advisers who should be struck off?  No.

I would almost guarantee that advisers within a robust network business are subject to far greater scrutiny than many directly authorised businesses … why? Well because unlike compliance service companies I, and my Board colleagues, have our houses, careers and reputation on the line for the advice given by members.

The key word above is ‘robust’.  What are the risks to a network member?  Primarily two fold; the first is the financial stability of the host network.  This is easily and quickly qualified by looking at the businesses accounts including the balance sheet and understanding what the true position is.  Can the business see tough times through whilst investing in the future?  All competent advisers should be capable of understanding the financial accounts of their host organisation and that is irrespective of whether they be part of a national, network or small directly authorised business.  The second is the regulatory risk.  This is where advisers should be pleased if they see strong compliance themes throughout any business … as not only is it ensuring that they are compliant it is ensuring that their colleagues are also.

So do I believe networks are the right and only solution for all advisers and advisory firms?  Personally I believe in the freedom of choice.  There is quite clearly the requirement for a supportive environment of a true National IFA that provides centralised support, services and potentially lead generation.  It is also quite clearly appropriate for some business to be directly authorised in order to provide them absolute autonomy in how they act and interpret the regulatory guidelines.  Each model has their benefits and draw backs and will, as ever, be down to personal choice and that choice may change over time.  So if I can see the value in other business models why can’t others?

I am a great fan of ‘The Strategic Coach’ and one of the founding principles of the programme is ‘delegate everything except your unique genius’.  The philosophy works on the basis that in any one day you will be engaged in activities that you are; uniquely gifted, excellent, competent and incompetent at … and that clearly the aim should be to expand the time you have available to spend in your area of ‘unique ability’.  Advising clients and running a compliant, profitable regulated business sometimes require very different skills sets.  By in large, advisers are ‘uniquely gifted’ at creating great relationships, endearing trust and presenting innovative solutions in a simple fashion.  Therefore ‘some’ advisers will choose to delegate the other areas away to a network who will stand shoulder to shoulder with them to drive their own business model forward.  Amongst our Boards there are qualified IFAs, ex Investment & Retail Bankers, one ex KPMG partner as finance director and a risk director who has worked directly with and for regulators and, at last count, at least five are chartered accountants from memory … now whilst that may not make for the most riveting of Board meetings in my opinion … it certainly provides a breadth of knowledge and experience I have yet to find within a small directly authorised firm.

There is also an interesting comparison between the adviser / network relationship and the client / adviser relationship.  Could some well-educated and sophisticated clients manage a great deal of their own financial planning by carrying out their own research, analysing options, interpreting rules and then transacting direct with institutions?  Yes of course some could but as a profession that wouldn’t be our recommendation and inevitably some could miss some vital points or misinterpret some legislation in the process.

So where did my ramblings start …. referring to a forum on IFALife and the use of social media in financial services and the regulator’s recent communication on the matter.   What I found saddening was that at a time when the profession needed us to unite to better understand, explain and educate on the use of social media it had so quickly diverted into the all to frequent ‘handbags at dawn’ between business models delivering the same thing – robust, compliant and value adding advice.  So an appeal to all … there are some significant and challenging external battles to fight so let’s focus on those jointly to achieve a great collective result for all ….

Stephen Gazard is managing director of Falcon Group plc (part of the Lighthouse Group plc)


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Is this not the same man who previously worked shoulder to shoulder with Malcolm Kilminster of Kilminster Financial Management? Need I say more……………

  2. I whole heartedly agree, these people that bash others within the same profession tend to be the fee charges bashing the commission charges. They blame bad advice on commission yet ignore that bad advice is given by bad advisers and fee charging advisers can also be bad advisers. Yes a commission adviser can recommend a product for most commission (research shows it tends not to happen) and at the same time a fee charger can make up the time to charge more (not been researched yet). It demeans competition when clients are not given a choice, and when the only choice is go to a fee charger that will over charge you whether you like his advice or not it’s a sad day for financial services .

  3. Stephen should re-read the IFALife blog thread. It was not a bash of the networks but a healthy debate about whether or not use of Social Media could be within the FSA Conduct of Business Rules.

    If anything his hyper sensitive reaction above adds more fuel to the fire that he seeks to dampen.

    I couldn’t agree more with Stephen that infighting is counter productive but you only have to read most of the anonymous blogs on the MM website to realise how far away from being a profession the IFA community actually is.

  4. Stephen Gazard 7th July 2010 at 6:00 pm

    Nick … I agree, actually the thread has moved on since I penned the article and it appears to be back on a productive focus ….

    I am glad you agree with the need to unite and stop the infighting …. together we prosper.

  5. Being long in the tooth & having proudly retained direct authorisation since FIMBRA I can fully appreciate that Networks have & no doubt will continue to have,very positive benefits for both Clients & those Advisors who need the support available.
    If there were slanging it is both denigrating to those responsible & totally ineffective.
    For more might be achieved as Stephen suggests if we all worked for common good to promote “Whole of Market” & concentrated on the continuing inappropriate sales by Bank & Building Society highly incentivised salespeople.
    Would the FSA wish to learn about £60k commission taken by a Building Society in May this year from a retired couple who are cautious & now have over £1.5m in unit trusts via their tiedInsurance Company? Unable to provide any sensible tax or trust advice the salesman who I questioned could only say “it has been passed by our compliance people so what is wrong!”
    OR the Bank in 2007 who put £16+m for 2 Clients into the AIG Premier Bond.The Clients cancelled within 30 days but were persuaded verally that since AIG’s rating was higher than the Bank it was fine.The cancellations were ignored without any formalities and at present the the rest is history……watch this space.
    I could go on but suffice it to say,an united front will achieve far more-especially if the single trade body were fully supported by our sector.

  6. I’m with Steve Gazard.
    Stop the infighting.

  7. James Marchant 7th July 2010 at 7:49 pm

    To be fair to Steve, I have read quite a bit of network bashing on IFA Life and other forums and as the MD of a well run network, I am not surprised that he has chosen to respond with this article.

    There are quite a few ‘holier than thou’ IFAs out there at the moment with a lot of things to say, much of which is not constructive or helpful to the sector. Wouldn’t it be better if we all worked together to embrace the opportunities that RDR will bring for the betterment of the people of the UK?

  8. Philip Calvert 7th July 2010 at 8:07 pm

    We appreciate your very kind comments Steve. Thank you.

    IFAs need to support each other more than ever before, and that’s why (I assume) that thousands of IFAs have now joined IFA Life.

    But, given that the original topic was about the use of Social Media in Financial Services, it’s very worrying that we often see IFAs bickering online – to the extent that some are destroying their reputations in front of our very eyes.

    They often talk about the compliance dangers of Social Media, but then go on to prove that compliance is not the issue at all – but their inability to communicate and to accept that a wide range of business models exist within the profession – all of which work to a greater or lesser degree.

    IFA Life was founded on the belief that IFAs need to network with each other, debate industry issues, exchange best practice and to provide help and support to one another. As we approach our birthday next week, we are very proud that we are providing an environment to let IFAs do just that.

    This is worth a look

    Thanks again Steve.


    Philip Calvert
    IFA Life

  9. Michael McKee 7th July 2010 at 9:44 pm

    Look.. Networks when they were set up were useful but they have become self-seeking in so much that they are no longer interested in their members but only in their existence.
    What I mean is in the past, they did not fight injustice against advisers by the FSA because they wanted a scared IFA / BROKER membership to need them. They didn’t fight lousy financial laws and regulation, Their crocodile tears disguised their glee at ever tighter regulation forced us to rely more and more on them for compliance etc. However the networks misjudged the regulators and allowed the incompetent regulators (regulating now to keep themselves in highly paid jobs) to regulate them and us with a more and more heavy handed to the point that regulation has become more & more onerous, even to the networks. They could have allowed the FSA to become a monkey on all of our backs whilst allowing the FSA to let the banks and insurance companies away with financial murder. What have they done for us? Did they defend us – just look at RDR etc. The answer is NO!

  10. Charlie Darwin 8th July 2010 at 10:34 am

    The Dodo isn’t dead?

    Elvis is still alive?

    The earth is indeed flat?

    So many opinions and they are all correct.

    The fiercely independent IFA has enemies, they include the banks, a few providers, some deluded politicians and of course too many misguided regulators, however his most dangerous adversary is himself and his fellow IFAs.

    Is it a fact, as is claimed, that that the networks didn’t challenge the RDR because they will be laughing all the way to the bank, a bank which also didn’t put up much of a fight.

    Is it a fact that the small IFA is in fact a Dodo and he/she will be gone by 2015 even if they survive the RDR debacle? Is that because they couldn’t get together and speak as one?

    Evolution – Survival of the fittest.

  11. James Marchant,

    As a well known “holier than thou” network basher may I congratulate you on your elevation to MD of a well run network.

    Please take the FSA to task for not updating its register to show you in your resplendent new role.

    Mind you there does not seem to be much page space left after listing your peregrinations over the last few years.

  12. James Marchant 14th July 2010 at 8:46 pm

    Very grown up comments Simon, what a clever chap you are!

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