Sally Laker, managing director, Mortgage Intelligence
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.