To recap, the FCA final ruling said: “The Authority regards Financial’s failings as serious because they were directly attributable to Financial’s cultural focus which viewed the ARs and RIs, rather than the customers of the
ARs and RIs, as the end customer.”
While NatWest is entitled to take any decision necessary to protect itself, is it right that Appointed Representatives (ARs) are all sanctioned as part of a network?
This week our panel of experts considers whether being part of a network means the AR should be tarred with the same brush as its umbrella organisation.
Colin Payne, associate director, Chapelgate Private Finance, says if your network lets you down vote with your feet and get out of there.
Mark Mifflin, head of compliance at networks Julian Harris Mortgages and Julian Harris Financial Consultants, says ARs will inevitably share in the downfall of its network and offers help on finding a reliable partner.
Toni Smith, sales operations director at First Complete, says while its never right that a broker suffers because of a network there are steps brokers can take to help themselves
Colin Payne is associate director for Chapelgate Private Finance.
It is extremely unfair for advisers to be tarnished with the same brush as their network. I know of circumstances where lenders have ceased to accept business from a specific practice due to the rogue dealings of one broker, again something I feel is unfair.
Lenders will always make judgements rightly or wrongly and all ARs are likely to be disadavantaged at some point, for example lenders that have quality-based procuration fees.
I strongly believe that my relationship with a lender is outstanding in terms of quality yet our proc. fees were reduced due to the overall performance of all ARs within the network. Matters such as this have to be taken on the chin but to have a lender withdraw completely due to its network would certainly make me vote with my feet and change network.
It may sound drastic but there are some excellent networks and the transition doesn’t have to be an awful experience if you do your research. The impact on my business otherwise would be substantial, we have placed some good business this year with NatWest, business we may have lost.
Our own clients would start to question whether they wanted to continue to do business with us and with 80% of our business from existing clients and referrals, that is not a price I’d be prepared to pay.
Mark Mifflin is head of compliance at networks Julian Harris Mortgages and Julian Harris Financial Consultants.
Advisers should not be punished, but inevitably are, when a network falls short of the regulator’s requirements. As the network’s reputation is adversely affected and its competence is brought into question it is understandable that lenders will remove their permissions, which impacts the business functionality of its ARs.
The situation with Financial Limited emphasises more than ever that careful consideration is needed when an adviser is choosing a network as their business can be severely impacted by the actions of the network and its ARs.
So, when considering becoming an AR, advisers must assess two key factors.
Firstly, the network must have a thorough and robust recruitment process which results in them being selective about the ARs they recruit. If the process is too easy then you have to question the calibre of advisers already on board who could indirectly affect the business of the whole network.
Secondly, the network must have a strong compliance ethos driven from the senior management down. Its procedures are thorough and there is sufficient support to manage the number of ARs the network has.
With good management and competent advisers the issues that Financial Limited has faced can be avoided and ARs need not be adversely affected by the actions of their network.
Toni Smith is sales operations director at First Complete.
I don’t think that it is ever right for a broker to be punished because of its network’s actions. Brokers should never lose out due to inadequate controls or inappropriate behaviours.
However, the broker does have a role to play in choosing the right network which will not fall foul of the regulator. Every broker should carry out their own due diligence to make sure that they are part of a network that is behaving in the right way.
They should ensure a network has a structured and competent compliance regime as well as a robust training and competency scheme in place. This way it ensures that every broker has the skills and ongoing training they need to keep them educated and a safe sales process in keeping with the current regulatory environment ensuring their clients are given the right advice based on their situation.
When doing due diligence, it is also important that the network has sufficient scale to offer a comprehensive product choice in order that the broker can chose from a wide offering to suit their clients’ needs. Finally, the broker should look for a network that is financially secure with robust financial backing.
Of course there are other factors that a broker can help influence, such as quality, which can affect the overall quality measure of a network – something which most lenders place great importance on. The network should have reactive and proactive measures in place so that if an individual does something wrong this is noticed and tacked at source to prevent the whole network from being penalised.
