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Peter Hargreaves

The various investment groups and life companies seem to enjoy different relationships between themselves than brokers enjoy with other brokers.

Don&#39t get me wrong. Old Sun Unit Trusts and Boston Bombshell Unit Trusts never forget that they are competitors but they do get together and talk and enjoy friendly rivalry rather than brokers&#39 daggers drawn approach. Indeed, I think the groups encourage brokers to fight on the basis that divided we are conquered. I do, however, think that there is a definite change in attitudes. Perhaps the networks have engendered this in that different brokerages belong to the same network and, therefore, obviously have an automatic affinity. But brokers outside the network are increasingly talking.

Most small provincial brokers will always have a few clients who are really out of their depth. They may be able to handle their pensions but possibly not their investments or vice versa. Brokers are increasingly concerned about the underlying investments for drawdown arrangements. Your old client you have serviced for 20 years has suddenly sold out his business for £10m and you know you are not going to get that investment case.

Some lazy City merchant bank will look down their noses at him. Nevertheless, they will pick it up and they will put a straight-out-of-university, clueless clerk on the case and your client will be happy.

I think many brokerages are today coming to the conclusion that it is better to put a specialist broker in to pick up that huge pension drawdown case, to invest that huge capital sum or even instigate a massive group pension scheme. The small brokerages always prefer to do this work themselves (and may even be competent). The trouble is if you are a two-man band, you do not have the gravitas and cannot give enough credence to your proposal.

We are often called in by small brokerages to assist them in some of their more complicated cases. We can normally arrange that they earn as much as if they had done it themselves but their chances of being successful are increased enormously. For our part, we guarantee them that we will never, ever steal that client even if the client asks us to cut out the introducing broker.

There are many specialist brokers in the UK who could offer such services to other brokers. The one great good that comes of all this is that brokers are becoming a united force rather than a conquered ragbag of competing enemies. We might have even been able to get together to fight the Sandler report more effectively if there had been more co-operation over the years. The only problem is that brokerages are so diverse and all have different agendas whereas the investment groups are pretty much focused on doing exactly the same thing.

I do see a new world in the IFA and broking market. There are many brokers who really do not want to belong to a network but miss out on some of the network advantages. I can imagine brokers will almost have a franchise arrangement with a big lead broker who will provide investment research, marketing, specialist tax advice but group them into a buying group whereby the individual brokerages will obtain exactly the same income as before and the lead broker will be remunerated by a small override.

Very few small brokerages have the time, expertise and the level of compliance to produce marketing literature – guides, newsletters, topic papers, investment commentary, etc. The lead broker will just keep in contact with white-label literature sent out from a central source. There will be assistance on billing and how to charge fees and these new groups of brokers will enjoy their independence at the same benefiting from the central resource.

Peter Hargreaves is chief executive at Hargreaves Lansdown


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