If you were asked to come up with some words to describe an average urban, state secondary school, what might spring to mind? Low standards, poor discipline, bad reputation? The media over the past few years has painted quite a gloomy picture of the condition of modern, state education and this colours the general perception.
Popular television programmes such as Educating Essex, and more recently Educating Yorkshire, however have given us direct insight into just a fraction of the fantastic schooling that takes place, day in, day out across the UK.
Talented students, inspiring teachers and the thought and nurture behind the ambition that everyone should perform to their best ability has challenged our perceptions and given us a view of some of the reality - living and breathing behind the headlines.
Why am I talking about schools you may ask? I am just using the analogy as a reminder that it is easy to adopt a general perception about something without any first-hand or solid evidence to back it up. In a similar way to state secondary education, networks have laboured under a general cloud for many years that the model is flawed, dead or on its way out. Not all networks are created equal and I am not purporting for a minute that there are not the good, bad and indifferent as within any industry, but the bad seems to get disproportionate focus compared to the good. Maybe it is just time for a little more balance.
Networks are not for everyone – individual advisers have a number of support options available to them and support service providers, networks or nationals are all appropriate models to consider. One is not universally better than the other, unless you specialise in very niche markets. The key for advisers is fully understanding their responsibilities and having a structure in place to fulfil them.
It might be useful here to look at what networks do and what they do not do.
Networks are designed essentially to provide a regulatory umbrella and framework to enable their members to give advice which is compliant and delivers the best result for the end customer. Helping firms to operate within this framework mitigates the risks of future claims and costly financial liabilities which can lead to increased FSCS levies.When legitimate claims do arise, major networks have the financial strength to settle the complaint without causing a drain on the wider industry. Many networks derive their financial strength through their ownership by major life companies which additionally allows these companies to invest in the future health of the advisory market in a significant manner, which they would otherwise struggle to do. Investment in the networks by these large organisations provides the network members with increased long-term security.
Importantly, it is the network’s role to keep abreast of FCA communications, rules and requirements and interpret these into policies and procedures for member-firms. They provide education and training, supporting advisers to fulfil their CPD requirements and obtain their Statement of Professional Standing. Networks help members create business plans and develop appropriate systems and controls as well as delivering a training and competence scheme tailored to the relevant level of expertise. They offer research processes, including researched panels for different business areas and conduct due diligence, limiting exposure to high risk or future ‘toxic’ products for customers. For advisers offering either an independent or restricted investment advice service, the increased regulatory burden to demonstrate suitability of advice and the development/maintenance of product/ fund panels is a challenge particularly for any but the larger firms that can afford the investment in the necessary systems. Networks also set competence criteria for advisers, train and supervise new advisers and monitor advice quality.
Of major significance, networks offer their members a capital adequacy shelterand in an increasingly hardening market,source quality professional indemnity insurance cover.
Support to embed value in member businesses and for succession planning is also offered and helps ensure the future health of the advisory industry and the continuation of an advice service to customers. This list is of course not exhaustive, but covers some of the key areas of network responsibility.
As mentioned, different networks will fulfil these responsibilities with differing levels of quality and efficacy, but the fact that this work is undertaken following close consultation with the regulator can only be a good thing for the end customer and the adviser.
So what do networks not do? Networks have to strike a hard balance between overseeing members and being overly intrusive: it is the members’ business at the end of the day and the two have to work together as a team. While networks provide the framework systems and controls for members to work within, they cannot be held to account for those individuals who actively aim to subvert these processes or even commit criminal acts. Advisers are authorised under the network banner for specific activities for which they are deemed competent. If they conduct business outside these permissions or engage in the world of unregulated activities, they are doing so outside the protection of the network umbrella.
Criminal activity is often undertaken by advisers conducting business through another unauthorised company or asking clients to write personal cheques and while good networks operate effective monitoring systems, there are limits to what they can reasonably be expected to detect or take responsibility for.
The network model does have its challenges and when things genuinely fail, there is undeniably significant disruption, stress and financial hardship. However, the well capitalised and well managed networks do bring a large amount of quality control, professionalism and stability to the industry, to the benefit of the end customer, advisers and the regulator - a role which gets little acknowledgement.
So like Educating Yorkshire on Channel 4, the recognition that the reality behind the perception can often be quite different may perhaps mean that we can have some more balanced debate about the value that networks bring to the industry. Thousands of advisers across the UK have great and long lasting relationships with their networks - this will not be a headline you will read anytime soon but it does not stop it from being true.
Mike O’Brien is managing director of TenetConnect and TenetSelect
Key points
Networks have laboured under a general cloud for many years that the model is flawed, dead or on its way out.
Networks offer their members a capital adequacy shelter and in an increasingly hardening market, source quality professional indemnity insurance cover.
The well capitalised and well managed networks do bring a large amount of quality control, professionalism and stability to the industry.
