Some industry experts suggest the FSA’s proposed increa- ses to capital adequacy will lead to small and medium-sized firms flocking to networks.
But SimplyBiz chairman Ken Davy says support services companies will be in even greater demand following RDR implementation. He says: “When you join a network, you lose control of your finances, authorisation and agencies. By joining a network, firms effectively sacrifice their businesses. The maximum cost for our support service is 2.5 per cent of turnover and can be as low as 0.5 per cent for larger firms so I do not think that is where they will look when cutting costs.”
Bankhall managing director of IFA services David Golder says the FSA’s capital adequacy provision proposals are “disappointing” at a time when IFAs are trying to survive difficult conditions.
But he says: “I do not think firms will reconsider their authorisation, as those that buy support services are determined to be independent. The cost of being a network member is typically greater than being a directly authorised firm and buying support services.”
Threesixty partner Phil Young says: “It would be very easy for us to become a network but it seems wrong to force people back into a network once they have made the decision to be more accountable and directly authorised in their own right.”