Networks must be resuscitated

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Networks must be resuscitated

I have spent more than 25 years working with networks and their fantastic advisers, and have seen the many benefits they bring to UK financial services, but change is now badly needed.

Many specialists believed RDR would sound the death knell for the traditional network, chiefly because of the removal of commission for investment and retail products.

Prior to RDR, membership of a network was mainly for the financial benefit of aggregation. The networks played the role of a ‘commission club’ benefiting from the desire and in some cases need, of providers to secure business and market share.

To acquire attractive commission ‘network rates’, panels of providers were produced, with the selected providers given access to members through a variety of ‘pay-to-play’ activities, such as seminars, workshops and publications.

This, in my view, created our present problem for many networks as they became specialised event management companies, surrendering the thought leadership, marketing and influence to the providers. They did this while cosseted by a false sense of security about commission rates which they believed aided retention and acquisition – commission that RDR has now removed.

Being a business owner in any sector can be a lonely place, but in our heavily regulated and legislation-laden sector there are a number of benefits to be had from network membership for the sole trader or small business: compliance, competitive professional indemnity cover, process development and training support. But is this now enough? I believe not.

The successful networks of our profession share a number of key attributes that the others would do well to research and adopt.

The networks of the next decade will have to offer more than compliance and PI cover. They must evolve into real business communities and provide thought leadership and assistance for their members in business development, marketing, technology and, increasingly, social media.

If a business community abdicates the intellectual growth of its membership to others in return for financial compensation, no matter how it is dressed up, how do you define the future direction of your model?

As it stands, the future direction of far too many of the existing network models is at the mercy of competing providers with their own strategic interests at heart. The networks of the future need to have a collaborative relationship with the remaining providers but they must also seize more control over their own strategic direction, becoming adviser-centric with the growth of their community at the heart of their existence, a culture that grows and develops every individual and business in its community

The average age of UK financial advisers is a matter of great debate, but the latest research shows it currently stands at 54. How many will we have in five years’ time?

In a period when legislation and demographic changes have created a high need for professional advice, demand will soon far outstrip supply. So where do the advisers of the future come from?

The Sesame Financial Adviser School has sadly ceased trading. However, is it now time for the future network models to again be the incubators of the advisers of the next decade and beyond?

Future advisers need to be professionally qualified, but they also require keen relationship and people skills. Increasingly, it is essential they are also business people with training in planning, marketing and business operations. The business communities of the future must provide this.

Any adviser community needs to have the financial strength to survive and implement its vision. The recent announcement by Sesame that it is closing its investment and pensions appointed representatives business highlights the precarious nature of the current network model. However, national adviser communities are growing as Standard Life launches ‘1825’ and Towry acquires Ashcourt Rowan. This is a development existing and future networks would do well to study.

Vision is not some motivational poster hanging on a wall; it is the courage to determine a positive future and take people with you. The business communities that will thrive in the future are those that will take stock of our current and future landscape and offer a compelling environment for the advisers of the future. This must go beyond compliance and PI cover.

They could do worse than look at current growing models such as Panacea Adviser, where a community has been developed that provides real thought leadership and generation of ideas.

The past year has probably seen the biggest changes I can remember in my 28 years in financial services. Strong leaders are vital to ensure our profession can manage this change, and adviser communities need a consistent and coherent voice to make its case.

Business communities can provide this role acting as sounding boards for future legislation, cascading the changes and ensuring our profession has a strong united voice.

The traditional client life journey has changed, and so many advice opportunities are now available if they have a proposition and communications strategy that is tailored correctly.

However, in this evolving world, how many adviser firms are prepared for the future? The strength of a business community is that it can establish strong, robust, repeatable propositions that can be adapted and embedded by firms of all shapes and sizes.

For a proposition to be profitable it needs effective processes and technology that works for both advisers and clients. Business networks can ensure that their community can avail itself of the latest technology to deliver the proposition that is right for its clients.

The business networks of the future need to be social media outliers ensuring their members embrace rather than fear excellent communication media such as Twitter, LinkedIn and Facebook.

The debate will continue as we see consolidation in the network space, so while the commentators are writing their obituaries, this is now an opportunity for the remaining networks to adapt and evolve into true business communities to guarantee their future.

If they do this, they can ensure, that, to paraphrase Mark Twain, reports of the death of the network model are greatly exaggerated.

John Joe McGinley is head of Glassagh Consulting

Key Points

Many experts believed RDR would sound the death knell for the traditional network.

Any adviser community needs to have the financial strength to survive and implement its vision.

For a proposition to be profitable it needs effective processes and technology that work for both advisers and clients.