Some of the industry’s biggest adviser networks are suffering from a raft of historical liability issues which are leaving networks with little room to breathe.
Despite interest no sale has been agreed and although SBG itself is still preparing for what it hopes will be a prosperous future, the fate of the network remains unclear.
The primary obstacle to a sale is widely believed to be reluctance of any potential suitor to take on a business which could be harbouring unknown liabilities.
After SBG posted a £19m pre-tax loss for 2013, chairman John Cowan told Money Marketing the business was “facing up to legacy issues”.
To that end the business has been hiring in new staff to oversee compliance procedures and is well on the way to moving advisers into a restricted model.
Elsewhere, when Old Mutual confirmed the acquisition of Intrinsic in February, chief executive Paul Feeney indicated tight controls at Intrinsic had given him comfort that the acquisition would not come with excess baggage.
Nonetheless, he accepted the business will need to stand behind Intrinsic when issues do inevitably surface.
Openwork accounts filed in 2013 show redress payouts of £2m despite the network avoiding exposure to unregulated collective investment schemes and other non-mainstream products
Seeking to provide a remedy, insurance brokers Marsh are trying to engineer a deal on behalf of a number of networks to transfer historic liability risks onto an insurer.
Deals of that nature are more common in other sectors where risks of fines and redress around past business are easier to contain and measure. But pricing that risk in the advice sector will be difficult.
Factor in contractions in the size of the adviser community, ongoing questions about trail commission, and the fact the FCA are clamping down on inducement payments and the future for networks looks bleaker still.
With all that in mind, there came some welcome news last week that a 15 year long-stop on complaints to the FOS will be considered.
The trouble is advisers are a disparate community which does not lend itself to effective lobbying. There are just a handful of banks, insurers and asset managers (all with resourcess to support lobbying efforts), making it easier to consolidate a single agenda.
Apfa will perform a key role in representing adviser’s case for a long-stop but the broader adviser profession must be more assertive. A campaign by Tenet to force the issue of a long-stop for advisers onto the political agenda is still only halfway to achieving the 10,000 signatures necessary to force an official Government response, despite a recent spike in signatures. That petition alone will not prompt real change in the immediate term, but it would add weight to the campaign and increase public and political awareness of the issue.
Without respite from the regulatory powers that be, the advice sector runs the risk of being forced to adopt a compliance-led culture where regulatory requirements eat into both financial and human resources, blunting investment and innovation.
Michael Glenister is platforms and distribution reporter for Money Marketing – follow him on Twitter here