Clients are constantly looking to get value for money, but so are advice firms when deciding on whether to stick with network membership or become directly authorised.
Networks are finding ways to evolve their propositions for their IFA members, with new carrots for joining and sticking around.
However, in a recent poll on the Money Marketing website, 58 per cent said they thought directly authorised was the way to go compared with 26 per cent for networks and 16 per cent who were undecided.
According to data from Apfa, now part of Pimfa, the majority of advice firms are still appointed representatives. 8,600 of the 14,000 advice firms in England and Wales have this status.
The 60:40 ratio between network and direct status has remained relatively stable over the past eight years, but, since 2014, there has been a slight uptick in direct authorisations, as 232 more firms opted for DA status, and nearly 500 fewer appointed representative firms were recorded.
A Platforum survey in June suggests that some of the most popular reasons for network membership are that it is simpler to run the business, that the support service is cheaper or better, or that the FCA approval process is easier.
Plutus Wealth partner Georgina Partridge was with an Intrinsic AR at a former firm. When forming Plutus, however, the team decided on the strategy to outsource where necessary, for example, in compliance, to be more cost effective, but not to become an AR again.
She says: “The speed of getting things done wasn’t great from the client journey point of view. Because the network was doing things for us it slowed it down rather than the other way round.
“Client outcomes are so important. Sometimes that’s forgotten. Sometimes the bigger networks are more about profitability.”
As Partridge points out, networks may also not be as secure as some advisers would like to think. Recent examples of closures (Financial Limited and Sesame) and ownership changes (Positive Solutions and Caerus) illustrate this.
She says: “I don’t think it guarantees safety…In my time in the industry, they’ve gone under, been bought out, changed, there’s been quite a lot of that.”
However, the biggest issue Partridge raises is one of culture at large networks. She says: “With the big players, it can be about utilising assets, moving them around for what’s most profitable…With the big networks it can be difficult to reconcile whether that’s better from the client outcome perspective or better for the network.
“Independence is really important to us and we want to continue in that way. High standards of independence, being chartered and all of those things are what builds confidence from the consumer’s point of view.”