Incoming appointed representative (AR) reform risks unfairly painting all networks “with the same brush”, despite the fact the operating model underpins three very different industries.
That’s according to Rory Gravatt, head of distribution and product strategy at consultancy Altus, and previously an employee at Sesame Bankhall Group and Tenet, which both operate AR models.
Reforming networks’ AR models is high on the Financial Conduct Authority’s agenda this year, and it has been a subject of much controversy since the publication of the watchdog’s consultation in March.
According to the FCA, networks generate between 50 and 400 per cent more complaints and supervisory cases on behalf of themselves and their members than firms which are not networks.
This has led the watchdog to conclude more issues arise from principals and ARs than they do from directly authorised firms. Hence, it has deemed a change to the AR regime - introduced back in 1986 - is needed which would see networks report annually on every AR firm member.
“I find it interesting that we term it as an ‘increase in complaints’. If we look at the data, I don’t see in the investment sector for example a huge differential as such,” said Gravatt.
“I noticed more around the general insurance and perhaps the mortgage network area where there’s more elements taking place.
“I think you’ve got a very different control and mindset there. We’ve got three different markets, all perhaps being painted with the same brush which I’m not convinced is fair.’
Gravatt said the AR model has matured over time. “It would be fair to say, certainly in the investment space, principals have learnt that they are on the hook for the advice and therefore they want to understand more about what their ARs are doing.”
The incoming reforms, Gravatt fears, pose ongoing, morphing costs rather than a one-off cost to network models, and AR firms simply are not equipped to process the paperwork involved, let alone the networks.
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