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Tenet chief hits back at FSA attack on networks

Tenet distribution and development director Keith Richards says the FSA’s warning that networks present a growing risk of consumer detriment will damage consumer confidence and undermine the sector.

In its first retail conduct risk outlook, published this week, the FSA claims the network model presents a potentially growing risk of consumer detriment due to weaknesses with systems and controls.

The regulator warns networks are under pressure financially and it is concerned about networks’ oversight of members.

The regulator says: “A number of networks are under considerable strain, with continuing pressure on income and low levels of profitability. In addition, supervisory activity with networks of various sizes continues to reveal significant issues with the control and oversight that networks exert over their appointed representatives.”

The FSA says there is a risk these problems will worsen in the run-up to the RDR as networks push to expand their adviser numbers.

Richards says the FSA’s claims will damage consumer confidence in the industry.

He says: “What a governing body should be doing is working to protect consumer confidence. Instead, it is publicising statements such as this which damage consumer confidence. It is difficult to understand what the FSA’s purpose was other than to cause speculation and undermine the sector.”

Richards says networks are being unfairly singled out as most businesses have struggled financially in the current economic climate.

He says: “There are many consequences of economic change for all organisations, they are not exclusive to networks. The FSA has merely given people who have an axe to grind with networks a chance to jump on the bandwagon.”

Personal Touch Financial Service sales and marketing director Dev Malle says: “It is quite concerning when these general comments are made and we are all tarred with the same brush.”

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Comments

There are 19 comments at the moment, we would love to hear your opinion too.

  1. But where was your voice before? 2nd March 2011 at 2:04 pm

    Here we see a Newtwork quick of the mark when attacked but oh so quite when RDR threatens to hand them members trail fees on a plate from culled members!

  2. The statement from the FSA reads as if they are talking about themselves.
    sic ‘In addition, supervisory activity continues to reveal significant issues with the control and oversight ‘
    Ridiculous statements such as this should not be allowed to be released by the FSA.

  3. Wouldn’t it be nice if the FSA had named some names now we get some mud slinging back from Networks that may or may not be the ones the FSA comments were targetted at but meanwhile the important people whose livelihoods rest on the Network being financially stable ie us the brokers are clueless as to whether we are at risk.

    Has the pathtic monitoring of Network Data and Mortgage Times not taught the FSA anything – they knew ND was struggling 12mths before the wheels fell off and left brokers out of pocket for millions in commission so please tell us whether we should be finding a new home or can feel safe where we are.

  4. I doubt very much if this statement will damage consumer confidence in the Network sector, Mr Richards.

    In my view, most consumers have absolutely no idea what a Network is!

  5. Exasperated Me 2nd March 2011 at 2:13 pm

    Networks should stop complaining and get their glass houses in order, they have been allowed to self-regulate for far too long, as have the banks.

    Go on FSA, send in the stormtroopers..

  6. John Blackmore 2nd March 2011 at 2:15 pm

    There must be a reason why the FSA have made this attack. It must be frustrating for the FSA to have to deal with thousands of small “Proper” IFAs – all with different views and practices. I would imagine that the FSA would prefer to deal with a small number of banks and a small number of Networks.

    So why the attack ? My guess is that the FSA see Networks growing as RDR makes life more difficult for small IFAs. They want to to make it clear to all that they expect advisers of the future to essentially all work in the same way – in practice to be part of the Borg. Independence must be destroyed and all assimilated.

  7. If networks did not exist, and the current network members became directly authorised, the FSA (or its successor) would have to actually monitor and supervise the thousands of newly directly authorised firms themselves.

    Then where do they think they’d be? With a job for life at last. Magic!

    I’ve no axe to grind here – we are directly authorised – but on the whole networks did a very good job. 15 years ago I had no alternative to joining a network when I first set up in business as an IFA (actually the alternative, becoming a product flogger in a direct sales force of some kind was not an alternative I was prepared to consider).

    So I am very grateful for the very considerable input that the network I joined gave me. Let us hope that they can continue to give valuable input into the activities of their network members now.

  8. Hang hang on! The FSA do not like Networks, the FSA do not like directly authorised, the FSA do not like anyone unless they are _ankers. You have a choice of letters on this questions, both are correct!

  9. Martin Bamford 2nd March 2011 at 2:54 pm

    I think that any sensible person would understand that the FSA is not referring to ‘all’ network business models when identifying these potential risks.

    However, where a network is a) habitually loss-making and b) operates on the basis of 10% or less ‘after the fact’ case checking, surely the regulator is right to highlight some concerns?

    As the sector appears to be structured in such a way that those of us who run profitable, well managed businesses pick up the cost of our peers failing, if the FSA has concerns about the sustainability of some IFA network business models, we should all have concerns.

  10. As a long standing member of Keith Richards own network, I have noticed with growing concern the amount of resources that are diverted to the “new” members that continuously come across after the failure of the very sorts of firms the FSA is talking about. Network services are not being enhanced and developed to meet the needs of experienced advisors in secure low risk businesses. As long established firms come to realise that they are giving a generous cross subsidy to lower quality firms with high staff turnover, poor sales practices and out of date business models, we think about leaving (many of my peers have done so already). This does mean that the overall quality of network memberships is being diluted. I have for years argued that network executives should impose a quality standard, not just look for member growth, but I have never had a whisper of feedback supporting such a ridiculous idea!

  11. Hi Mr FSA

    Can you tell me exactly what you like ?

    There is only one group of people that are destroying consumer confidence and that is those idiots who spout out this type of rubbish to the press.

    You really have lost the plot.

  12. Pity the FSA is not prescriptive rather than reactive. Instead of closing the regulatory door after the horse has bolted why not close it before and tell us what the hell they want from us.
    The FSA is like the Labour Party in opposition shouting about all the “front line cuts” that they have forced on us through their own financial ineptitude.

  13. As a member of Keith’ network I can honestly say that I have found Tenet mostly a pleasure to deal with over the years. The only gripe I have is the cross subsidy that exists with lower risk well run businesses like ours towards the more risky businesses models. However since the keydata fiasco that is more of an industry issue that just networks.

    Overall I fail to see what the FSA was trying to achieve with this announcement other than just being a critic for critic sake with no specifics.

    Nothing really new, insightful or helpful in their comments.

  14. FSA – Full Of Stupid Announcements

  15. Pity they didnt apply such foresight to the banks.

  16. To Swanny ~ yes, I agree. When is the FSA going to announce something positive for a change and in praise of the many good sectors of the industry? Then at least the industry would know what types of practice the FSA actually approves of and to which it should aspire.

    To Greg Heath ~ Tenet have actually announced that it intends to review its charging structure so that low maintenance firms with good compliance and KPI track records will be charged less and high maintenance firms will have to pay more, though that was some months ago and we’ve heard nothing further since. I’ll have to drop Keith a line and ask him what’s happening on this front.

    That aside, we’ve been with Tenet since 1995 (back then Interdependence) and, apart from just a very few very minor run-ins, we’ve always found it generally to be a very good business partner. Not the least expensive, it has to be said, but it’s reassuring to know it’s got plenty of capital behind it.

  17. How many accountants are part of networks, how many solicitors are part of networks. In fact do any networks even exist for these people. Their professional bodies are quite happy and capable of regulating and monitoring their activities. Networks are a waste of time. They don’t look after member interests. They are just after critical mass and then a sale to make millions. We need to see a return to well governed direct authorisation. Sorry, the the FSA never were any good at their job description.

  18. Tenet are a good profitable and cash rich network.

    I agree with Keith Richard’s comments, no-one group should be tarred with the same brush, especially by an organisation.

    So many people including advisers it appears by some comments, do not understand or even try to understand the different types of networks and what they offer.

    Today without having millions of pounds budget or access to outside services I think it is difficult, if not impossible, to deliver quality financial advice, have thousands of advisers in one place and the resources are far greater.

    Tenet is a good company and has a wide menu offering it is not an old tarted up network with a few electronic tricks, well worth a look for those who understand networks and services available to IFAs and IFA businesses.

  19. The issue here is where Networks rely a) on marketing subsidies from product providers and b) commission retention on indemnity terms. Both of these are dying out so it is only right that Networks will have to change.

    Networks that have robust monitoring (I know one that has 100% pre-approval) and flat-fee membership will survive and offer a much less risky environment in which to operate.

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