The group’s strategy appears to have paid dividends. True Potential group turnover increased by 61 per cent to £44.4m in 2014 – up from £27.5m in 2013 - while operating profit increased by more than £5m to £10.6m.
Size matters
For Dennis Hall, chief executive of London-based Yellowtail Financial Planning, networks have been traditionally fixated at scale – to the detriment of the more robust and experience adviser member firms.
He said: “The problem with large network centres on compliance. They would always base their compliance process around the lowest common denominator. An adviser firm would be forced to jump through countless hoops even though everything they do is clean.”
He added: “Smaller firms are nimbler and have members of similar quality and can therefore operate a compliance process that appropriate to its members.”
Chris Daems, director at London-based Cervello Financial Planning, whose firm was formerly an Intrinsic AR, said large networks are a boon for adviser firms in their infancy.
| Key Points |
The well documented reorganisation of Sesame Bankhall serves as a chilling reminder to rival firms The membership fee at Sense Network excludes the FSCS levy, FCA fees and PI cover. The commission ban in tandem with the proliferation of third party compliance consultants has resulted mushrooming apathy to networks among advisers. |
“The reason why Intrinsic worked for us is because we did not know anything about running a financial planning business and the network helped us in that regard. As you get a bit more experience of running a business, you get to a stage where you think ‘we can do it ourselves’.”
Future
Looking ahead, networks great and small are likely to survive in the increasingly challenging regulatory landscape, Mr Daems said.
He added many large networks will be forced to adopt the restricted model and become vertically integrated at the behest of their owners.
In contrast, smaller networks – typically privately held - are likely to appeal to adviser firms that are wedded to independence, Mr Daems said.
However, the commission ban in tandem with the proliferation of third party compliance consultants has resulted in mushrooming apathy towards networks among advisers, according to Dan Farrow, director of Chelmsford-based SBN Wealth Management.
On the latter, Mr Farrow added: “There is a growing trend of advisers seeking compliance support through third parties. I get the feeling that networks are becoming too rigid in what they classify as good and bad compliance. They are over prescriptive.”
Myron Jobson is a features writer of Financial Adviser
