A Network perspective

A couple of events in the last few days might go some way towards explaining why I’m so delighted to be working with ValidPath, and with Kevin and you guys too.  Over the years I’ve explained why I decided to be directly authorised when I had my own firm, instead of joining a network. 

Firstly, the financials were really unattractive for a fee-based firm.  The economics of network membership only worked out when the enhanced commission terms offset their deductions, so membership looked ‘free’.  Then most networks started charging extra for T&C supervision and PI insurance premiums, surely two core functions which should be factored into their core costs. 

More recently, several networks seemed indifferent to defending their members’ advice in the face of complaints or FCA reviews.  They approved the products for use in the first place, then approved the sales themselves, then profited from the revenue arising, but still chose to force their members to pay the full costs of any claims and excesses, so they have none of their own money at risk.

Now the major networks have moved from facilitating the business models of their member firms to dictating what the business models of those firms are going to look like, creating restricted advice propositions and forcing even those firms most strongly committed to Independence to give that up.

Worse, their brain-washing has persuaded some very good firms with no good reason that being Independent is impossible to deliver, unfeasibly costly to offer, and something that clients can easily live without. 

Then there was the conversation with a small discretionary fund manager, asked to pay £40,000 to simply go through the network’s due diligence process.  I assume this is intended to cover the reasonable costs of the network in assessing their offering.  But as with T&C and PI costs, a network approving a provider for use by its members is a core part of its service. 

Any provider offering products or service which could offer potential benefits to clients should be assessed free of charge, instead of making prohibitive charges which will prevent the smallest firms from presenting their offerings to the members, and which will prevent adviser firms from considering relevant solutions for their clients.

With the overwhelming tide of news about networks going restricted, and cancellation of events because they do not meet the new inducement rules, it’s easy to believe that networks are no longer in the business of facilitating Independent financial advice.  But not all networks are the same – which is why being here is no conflict between the work I did at IFA Centre supporting IFAs and the work I’m delighted to be doing with ValidPath!

A long-term ValidPath distinctive...

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Gill Cardy, 30/01/2014