How to choose your network properly

22 March 2010

Before anyone picks up a glossy brochure or trawls the internet looking at what’s on offer, you need to stop and think about your own business.
What do you want from the network, the future and, most importantly, what is right for you.

Often advisers make a mistake of joining a network or organisation because someone else says it is good. But being good and being right for you as an individual are completely different things. A pair of waterproof boots are good, but not if you’re going swimming.

Selecting and moving to a network can be a difficult task, which is compounded by each network stating their proposition is the best without giving proper consideration to your business.

Isolate your needs and consider the response to these as your true drivers. After this consider your preferences - what you would like to have and make a clear distinction between must-haves and like-to-haves.

For would-be appointed representatives there is no bespoke offering in the marketplace so inevitably there will be a degree of some compromise.

So although you need to be prepared to make a few compromises on your preferences try and stick to your core drivers.

Steps to making the right decision

You need to ensure you feel confident with the network’s finances. Last published accounts can be obtained from Companies House. Be aware that this information could be 18 months old, so look at previous accounts for obvious trends.

Further business referencing tools are also available. Although these aren’t geared towards the financial services industry and are expensive they can still be useful.

Does the network have a parent company or controlling influence? If so, check out their accounts and consider their appetite to remain a supporter of the network.

Remember, financial security is not just about size, how much turnover or profit the company has or even how much they have in the bank. Consider the overall model including charging, running costs and number of staff - is it sustainable?

Think about the network’s charging structure. Transparency is key and you need to ask yourself whether you can easily see what you are being charged.

Consider what you get in return - is it value for money, and more importantly does the structure have longevity? If it doesn’t then you could be in for a nasty shock when charges increase or even worse the network ceases to be after it runs into financial difficulty.

Confirm what is included, software, professional indemnity insurance, Financial Services Authority fees, compliance fees and be aware of penalty charges.

Compliance is integral to financial services. But you may be confident in your own abilities and would like to be given a degree of flexibility, or conversely you may want to stay on the designated tracks without deviation.

Networks’ interpretation of the FSA guidelines differs greatly and if you make the wrong selection it could prove an uncomfortable ride or even worse.

Commission rates and procuration fees are also important. Surprisingly many advisers overlook this and concentrate on the headline-charging percentage of the network.

Compare some of the providers frequently used and look at the gross commission. Loaded premiums still exist and if this is an important factor in making your decision, be sure to ask the network about it.

Lead generation is another issue that should be approached with care as it is rarely as good as advertised and is often supplied by a third party that could be used independently of the network.

Also, do you need active field support or just want to have the ability to call on support when it is required? Other ancillary services may be important to you such as a route to refer investment business or equity release.

Would you like to increase the number of advisers or have a training facility to develop existing advisers?

Other considerations must be given to the business submission process, back office and sourcing systems.

Professional indemnity insurance, what is covered and what is your excess liability should the worse happen is another important factor.

Check networks’ contracts, particularly exit clauses as if you need move on, you do not want a clause making it prohibitive for you to do so.

The character of a network is often apparent by the way it operates and the people who run it, and this can cascade down to the advisers.

As a result some advisers may decide that networks aren’t right for them and want to consider becoming directly authorised or even a registered individual with another firm.

If you are unhappy in your current home, isolate why this is so and be aware of the warning signs.

One of the first signs of instability in a network is delayed commission payments. If delays are increasing and more excuses are being provided you should assess your exposure and initiate an exit strategy.

Doing your own research can be timeconsuming but it is a major decision, so don’t take it lightly.

Use a professional, independent service like ourselves to help you, view comments on Mortgage Strategy or speak with current ARs or users of the network you are targeting.

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