CompaniesNov 12 2015

Firing Line: Andrew Bennett

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For Andrew Bennett, chief executive of adviser network the Beaufort Group of Companies, bigger is not necessarily better.

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.”

Mr Bennett alleges that some networks make a profit by charging member firms a fixed percentage fee to cover the group’s PI costs.

He said: “If a business joins a network today, it does not have any turnover with the network, so why is it paying any PI at all? Surely it should pay next year. The PI insurance for a business that gets appointed today is hardly anything.”

From humble beginnings, the group, which initially comprised Beaufort Financial Planning and Beaufort Investment Management, has expanded from three appointed representative firms to nine, with 35 registered individuals advising some 12,000 clients.

The limited group recorded a £253,172 loss for the period from 9 January 2012 to 31 March 2013 following its inception.

After a slow start, the limited company has since generated turnover of £5.6m and pre-tax profits of about £400,000 for the year ended 31 March 2015 – up 9.2 per cent and 71.7 per cent from the year before respectively.

In addition, Beaufort’s financial planning arm boasts the corporate chartered status.

The plan, according to Mr Bennett, is to maintain the positive trend looking ahead.

However, adopting the quality over quantity approach, the group has set a cap of 15 firms within the organisation.

Mr Bennett said: “We can usually tell whether or not a firm is going to be a right fit for us within the first hour of meeting its representatives.”

He added: “As we developed the business we wanted all the firms to adopt the branding of Beaufort to make sure that we look like a national IFA practice as opposed to a network and provided them with some equity if, indeed, we were sold at some point in the future, but also they very much needed to be on the same page as us.”

In this vein, the company aims to be transparent, according to Mr Bennett, adding that the group’s management account is disclosed on a monthly basis for the scrutiny of member-firms.

An increasingly complex investment space, the sunset clause and Mifid II are among the challenges facing financial advisers – all of which will put pressure on one-man-band advisers, Mr Bennett said.

He added: “I think many of them will struggle to survive. Many of them will be sitting under the radar because the regulator simply does not have the bodies to visit all of them to make sure that they are compliant.”

Andrew Bennett’s Career Ladder

April 2012 – present

Chief executive, The Beaufort Group of Companies

October 2003 – March 2012

Managing partner, Minotaur Wealth Management

1998 – 2003

Managing director, Entelechy Financial Management

1995-1998

Managing director, FPS Financial Services