First published by Best Advice
For appointed representative (AR) firms, choosing the right network is perhaps the most important decision you’ll make. Of course, setting up as an advisory practice in the first place is a huge step to take, or deciding that you want to go it alone after being part of a firm for a long time – these are decisions that are not easy to make and, for many, can be a leap into the unknown.
The positive of course for advisers is that there are networks available to support you, cover your compliance needs, deliver the tech you require to survive and thrive, and indeed to take you through the authorisation process in the first place. I know of many advisers who have wanted to make that leap on their own and were ultimately emboldened to do so by the support the network sector were able to provide in order to do just that.
Service gains in a “cottage industry”
We talk about the mortgage/protection advice sector being something of a ‘cottage industry’, where we have a large number of smaller firms all providing a quality service, meaning we are not dominated by a small number of large firms.
There are clearly benefits in that – you can be a ‘local’ adviser but at the same time able to source and service clients right across the country. You can ‘go it alone’ once you’ve passed your qualifications and secured your authorisation. There are a large number of opportunities depending on what you want from your employment – self-employed, to have your own firm, etc.
I think a large part of the opportunities available within the mortgage/protection advice profession are down to the existence of networks. Take them away, and advisers would probably have to join a much larger firm and the chances of them being able to ‘work for themselves’ would be lessened.
From a regulatory point of view as well, I believe the FSA as was, and the FCA as is, are comfortable with the way the market is split between DA firms and ARs within networks. The regulatory focus can be on the larger network structure rather than having to individually regulate double the number of firms it currently has to.
Running a tight ship
It’s also an important point to accept when looking at network operations, the ARs they do (and don’t) accept, and the ‘tightness’ of the ship they run when it comes to regulatory oversight and compliance.
Occasionally, I’ll pop onto one of the adviser forums available – or we’ll get this from the horse’s mouth – and there will be a complaint about Stonebridge’s perceived ‘overbearing compliance’. The adviser will normally bemoan the hands-on aspect of our Business Standards team, or deem it to be heavy-handed. We’ll sometimes be accused of gilding the lily, asking for too much documentation, or insisting on a line-by-line understanding of a case.
At other times, we might get criticism from advisers/firms that we have turned down from joining the network. To give you some idea, on average, we turn down 13 applications a month; last year we saw an 18% growth in the number of RIs under Stonebridge, but that could have been 25% if we’d accepted those rejected applications.
The point is that, for any number of reasons, we felt the firm or individual wasn’t ‘right’ for Stonebridge. For instance, it could be the simple fact that we don’t accept anyone with less than 12 months’ experience in the industry as an AR, or we have looked at their history and believe their compliance standards would not meet ours.
Protecting our firms
Now, clearly, that decision is not going to be welcomed, especially given the time some people/firms can spend on looking for the right network. But, that route to the network has to be water-tighter and so do our policies and actions for those who do become ARs. The nature of this business is that it’s an umbrella for many different firms and we have to protect those existing firms as much as ourselves.
Some firms/advisers would clearly like a ‘soft touch’ when it comes to their business standards, but part of the reason why we have a sector in which there are so many opportunities, is that networks like us, have a zero-tolerance to poor compliance. Our organisation, like others, does not run an open-gate policy to firms – far from it – and for that I think it’s respected by the advisers themselves, the regulator, and the clients who secure that advice.
We are very proud of the growth we’ve achieved in recent years, but it is the quality of the advisers and the firms we have brought on board that is more important to us. It’s not about growth for the sake of it, it’s not about volume for the sake of it either. That’s why we don’t have adviser number targets, we don’t hard-sell the network and our marketing is low-key, mostly reliant on referrals and recommendations.
Organic growth is achievable based on the number of quality firms/advisers out there who want the umbrella and want to know that those already under the umbrella are working to the same standards. Anything less than that and you can find yourself in deep trouble – much like prospective AR firms are choosing a network, we are also choosing the AR. The match must be right for both sides.
Lesley Sharkey is Recruitment Director at Stonebridge
