Mr Bennett is no stranger to problems faced by large networks, having been a member of Honister Capital, before its untimely collapse in 2012, after the company failed to secure personal indemnity insurance to cover legacy liabilities – affecting more than 320 firms and 900 individual appointed representatives.
Mere months before Honister’s demise, Alan Easter, who served as a director at the network, co-founded the Beaufort Group alongside Mr Bennett and a board consisting of industry figures including Aegon’s former head of industry development Peter Williams in 2012.
Mr Bennett said: “The network model is broken. We have learned from the experiences we have had as being part of a large network, so although we are classified as a network, we are trying to be anything but.
“The difficulty is that networks do not charge enough to make a profit and they are very restrictive in allowing firms to leave. If you have a network with a huge number of firms, it is very difficult to get all the firms working in the same way.
He added: “Also, if member firms have been in operation for many years, they have got this legacy that can still cause them great difficulty going forward, so most of the very large networks have set aside additional liability.”
The group’s charging structure has evolved from a straight percentage fee-based model to a percentage fee, plus consumption costs.
The latter takes into account the cost of the pre-approval process for new business – which the company aims to complete within a 48-hour period, according to Mr Bennett.
In addition, member firms are also expected to foot the bill for the professional indemnity and Financial Services Compensation Scheme levies.
“That is the prudent thing to do, especially with a significant rise in FSCS levies – that has to go to the member firms,” Mr Bennett said.
“With PI, we disclose what our premium is for the next year and how it is spread among the companies and they pay that over a period of time. When we get the FSCS bill, we break that down and also charge it to the IFA firms.
“It can be financed, but obviously it is their liability.”
He added: “FSCS used to be registered individual driven, but now it is turnover driven, so it is very easy from our numbers to say a firm has a certain amount of turnover in a certain period and that is what the levy relates to, so therefore its share of the bill is x.”
