Increasing regulatory compliance and rising back office costs have prompted many industry players to reconsider the way they run their businesses.
As a result, there has been a surge in advice firms of all sizes joining networks.
Some of the biggest ones in the UK are Quilter Financial Planning (formerly Intrinsic), Openwork, Tenet Group, St James’s Place, Raymond James; with Opesfidelio and Nexus Global operating across Europe.
So, what are the benefits of joining one?
Competency and capacity
Keith Richards, chief executive of the Personal Finance Society (PFS), believes it can be advantageous for smaller firms because “the network handles both regulatory and legal responsibilities to trade”.
“Adviser businesses need to be alert to what is happening as regulatory requirements and the raising of professional standards is only heading in one direction, and for many advisers this will mean putting some time aside to properly set in place a strategy and development plan,” he told International Adviser.
“Firms or individuals need to be honest in assessing the firm’s competency, experience and capacity to determine the most effective route to achieve their business plan, which must include regulatory requirements.”
Focus on development
For those struggling to keep up with the never-ending changes, networks could be the answer.
Nigel Brook-Walters, European head of wealth & advisory at SEI’s asset management distribution team, told IA: “By leveraging the networks’ knowledge and resources, advisers can take advantage of more peripheral benefits, such as third-party provider discounts.”
This could lift the burden off financial advice companies’ shoulders.
“They can genuinely help businesses power themselves forward, and enable them to concentrate on running their business, rather than actually worry about the paperwork,” Scott Stevens, head of recruitment and acquisitions at Quilter Financial Planning, told IA.
“The evolution of the network is a proper B2B service provider for financial advisers.”
A space for everyone
Quilter Financial Planning currently has over 3,300 between restricted and independent advisers and more than 1,300 firms in its network.
By taking care of the regulatory compliance and back-office functions, Stevens believes that it becomes easier for businesses to focus on customer outcomes.
There are also benefits for the regulator, he added, as it could speed up proceedings for the watchdog if it is dealing with a small number of big organisations rather than a plethora of smaller firms.
“I do think [networks are] the future, but does that mean there isn’t a place for directly-authorised firms? No,” he said.
“There are some brilliantly run firms with the right culture; and I think there will always be a place for those.
“But I think it’s increasingly attractive to have the cover of a large organisation.”
And this would still allow customers to have greater choice, since firms can retain their name and staff, instead of being fully incorporated into a larger brand.
Do your homework
Networks, however, may not be the best choice for everyone.
The PFS’ Richards said: “Joining a network or national business might well be the best fit for individuals or small adviser firms, but won’t suit everyone; so the key is to properly research the options available and implement accordingly.”
And that is something with which SEI’s Brook-Walters agrees: “Advisers offering a more vanilla service would generally be a good fit; but others, whose clients require something more esoteric, might find it harder to fit into the restricted framework that most networks tend to adopt.”