View more on these topics

Comparing the benefits of networks

Recent months have seen the failure of some high profile networks that served the independent financial adviser sector. The two biggest to implode have been Berkeley Berry Birch and Millfield. This has suggested to some commentators that the model is flawed and that the demise of all networks is nigh.

Some pundits also suggested that the race for volume, in terms of numbers of advisers, ended up being their undoing because chasing scale at the cheapest price left them with a huge burden of regulation they had not budgeted for.

Millfield was criticised for moving away from its core service provision model, leading to confusion in the market about what the company was about. In particular, some IFA networks made a big play to secure appointed representatives prior to Mortgage Day and agreed to extend their permissions, believing that the ARs only sold small amounts of mortgage business. They subsequently realised that these firms were selling huge volumes of business and have found integrating this into their organisations difficult and costly.

There has been some consolidation in the mortgage sector, although not nearly as much as some commentators envisaged. That is because there is a market need for strong, properly run networks that serve their members’ needs. Brokers have had almost two years of regulation to access the various network offerings.

Initially, there was no established mortgage network model for brokers to compare against. But nowadays brokers expect networks to deliver and to do what they say on the tin – no ifs or buts. The network proposition needs to be transparent, including pricing. This will help brokers to compare like with like and ensure they choose a network that fully meets their needs.

But as in most other business spheres, success comes down to money. Some networks grossly underestimated the costs of running their businesses – a network is an expensive business to run if it is done properly.

So the key to survival and expansion becomes financial stability coupled with a fully transparent proposition. Those networks with no established business model prior to regulation, no parent company backing them and a complicated benefits package may struggle. In terms of the network proposition, providing good regulatory support and innovative technology are the most important requirements and getting these things right must be the priority.

Similarly, as the Financial Services Authority looks more carefully at the sector, compliance support is gaining in importance. But networks need to recognise that firms may want different levels of compliance support rather than a whole package deal. And we must not underestimate the importance of exclusive deals either – an important element in the benefits mix.

Overall it’s refreshing to see networks being more transparent which is in turn facilitating comparison across the sector. This is a good thing for brokers who are considering making a switch.

Sally Laker, managing director, Mortgage Intelligence

Recommended

Tories launch campaign to protect neighbourhoods

The Conservative Party is launching a national campaign to prioritise building family homes over one-bedroom flats and protect England’s gardens and suburban neighbourhoods from being concreted over and over-developed.It says this initiative highlights Gordon Brown’s plans for new taxes on home improvements and gardens, and warns of the damaging effect of John Prescott’s planning regulations […]

First-time buyers lifeblood of the mortgage market, says A&L

At the first-time buyer summit held by the Conservative party today, Alliance & Leicester says first-time buyers are the lifeblood of the mortgage market.Stephen Leonard, director of mortgages at Alliance & Leicester, says: As house prices continue to go up and with the increase of existing homeowners buying second homes, more and more young people […]

Advantage poaches star manager from Platform

Advantage has recruited Platform’s star key account manager Sara Green as its divisional packager manager in the South. Green is widely credited with bringing in 40% of Platform’s packaged business and industry experts predict the firm will take some time to re- cover from her departure. She is also believed to have come at a […]

MEX launches new self cert deals

Mortgage Express has launched a range of two-year fixed rate deals on self-certification mortgages.The move comes in direct response to recent broker research indicating strong consumer demand for two year deals.Key features of the fixed rate products include a 90% LTV, with a 999 fee, a pay rate of 5.49% until September 30 2008 and […]

Thumbnail

Health Shield joins the Association of Medical Insurance Intermediaries

Health cash plan provider Health Shield has joined the Association of Medical Insurance Intermediaries (AMII) as a corporate member. The non-profit-making Friendly Society is one of eight health cash plan providers to join the intermediary trade body, which is looking to establish working parties with intermediaries and providers on issues such as product innovation and regulation.

Newsletter

News and expert analysis straight to your inbox

Sign up