The recent Sense roadshows, and the interactive session I ran looking at adviser’s websites, emphasised how few are mobile friendly. In many ways, this really shouldn’t be a surprise. In my experience, once built, most websites are rarely looked at again. Mobile friendliness is something I’ve been talking to advisers about for a while; but...
The rate of new start-up IFA practices is very much on the increase. Is this the latest unexpected consequence of RDR?
At Sense, we have supported 12 new start AR businesses over the past 10 months, more than the combined number of firms joining us from other networks and Direct Authorisation. Whilst some groups of advisers have reacted against a forced move to restricted status, in many cases the catalyst was far more subtle.
Over the 30 years that I have been in this profession, I have watched a genuine transformation. 30 years ago, insurance companies dominated the scene and owned, trained and managed hundreds of thousands of salespeople focussed on distributing insurance products.
Today looks very different. There are less than 25,000 advisers, the majority working in small firms and their direction, training and focus is on advice not on products. Professionalism has established strong roots and the development of knowledge and expertise will continue to change our profession over the next decade.
Against this background, where does the modern network fit in?
Business schools often emphasise the benefits of size. They see that large enterprises can benefit from economies of scale and that businesses who have significant market shares are often in a position to leverage that scale to obtain better prices from suppliers. It must follow therefore that a big network is always better than a smaller one?
I would reject that argument. There is an exception to every rule and when it comes to networks, smaller is most certainly better. Let me explain why.
The big, old networks were built for a different era. They developed in a period where scale gave them the power to negotiate better commission terms with providers and, as a consequence, they were less selective when it came to taking on new advisers. Profitability was sacrificed to the need to build scale and to realise a capital gain by selling to a product provider. Critically, they built their compliance infrastructure when regulatory scrutiny was much lower.
For the last 2 years, I have consistently warned that the anti-independence propaganda being spewed out by the big networks and nationals was driven by their addiction to provider money.
Last week’s Inducements guidance will make it far more difficult (even impossible?) for providers to pay for restricted or tied deals. The new guidance is significantly tighter than the original consultation: presumably because the FCA has finally become aware of the “dodgy deals” that were done in the run up to RDR.
Earlier this year, I wrote about how RDR was simply part of a journey not a destination in itself. 12 months ago, we were all looking towards the implementation of RDR with a degree of trepidation. Would our preparations be sufficient? Would clients be prepared to pay fees?
In truth, our worst fears were unfounded. Clients have seen the benefits of a fee based world and I genuinely feel that most IFAs are now firmly convinced of the benefits of continuing on the path to even higher levels of professionalism.
Regulatory change has continued unabated. RDR II, or the platform paper, will have profound effects on our profession and the key players within it. The principles that it promotes are laudable and should remove some of the “smoke and mirrors” within the investment industry.
Recently, one of my colleagues asked me if I had ever written a piece on the relative merits and demerits of being in a network versus being directly regulated. I had to confess that I have always shied away from a subject which is as nebulous as trying to write an essay on whether Liverpool or Everton are the best club on Merseyside.
The problem with the Network/DA debate is that it is coloured with emotion and a complete lack of objectivity. Can I write a piece which can genuinely be seen as satisfying those two problems? Let’s try!
The end of 2013 will see the first ratchet of the new capital adequacy requirements with the minimum capital required increasing to £15,000 or 1 month’s expenditure. Furthermore, over the next two and half years, the minimum will increase to £20,000 or 3 months’ expenditure. There are also new requirements which could increase this figure if the PII cover held by the firm carries exclusions or excesses above £5,000. For many medium sized DA firms this will present a genuine dilemma.
Only in March, LIFT Financial reported that they would be forced to concentrate on their self-employed arm rather than grow their employed, fee-based practice as their capital requirement could increase to £750,000 over the next 2½ years. Surely, the exact reverse of what the change to capital rules was intended to achieve.
For a firm with £1,000,000 turnover and fixed costs of £800,000, an additional £190,000 will be needed over the next 30 months.
Retention. Relationships. Risk Management.
Building quality, lasting relationships takes time and effort. This investment at the start of the relationship pays dividends in the long run; it builds trust and understanding. Provided the service quality is there (and at the right price), this is a good recipe for networks retaining their members.
So knowing all this, what message does a network with a high turnover of ARs send?
Looking over the figures compiled by Which Network, showing the total ARs (including gains and losses) at each of the networks, it struck me that the focus for networks has to be retention.
My earliest recollection of winning an award was getting 2nd place in the Egg and Spoon race at the school Sports Day aged 8. I wore that blue sash with such pride with no awareness that it would seem faintly ridiculous 44 years later.
History is littered with evidence of the extraordinary things that individuals have done for recognition. I read a fantastic book recently on the history of the Victoria Cross. The feats of bravery are so incredible that it beggars belief that our country should choose to reward them only with a dull, bronze cross forged from an old Crimean War cannon.
An Olympic Gold medal of the 2012 Games contains 1.34% gold but has incalculable value and prestige. The winner’s medals from the World Cup in 1966 are greatly sought after and, in 2010, Nobby Stiles’ medal was sold for £184,500.