Sehar Zaman, managing director of the newly-launched Abundance Network, welcomed the investigation arguing that in her previous experience as an appointed representative, she found that too often networks simply looked to take on as many advisers as possible.
She added that the investigation could raise standards, continuing: “They just look at the numbers, and ignore that a lot of the ARs need a fair bit of support. It goes further than just offering tools for CRM. ARs may need more guidance, and more support on being compliant, and adhering to the rules. They can’t just be left on their own.”
At the start of the month the regulator announced it was launching a consultation into the AR model in a bid to tackle the “wide range of harm” the Financial Conduct Authority (FCA) felt consumers could be exposed to.
Sheldon Mills, executive director for consumers and competition at the FCA, said that while the model brings more choice to consumers, there are “real risks of consumers being misled and mis-sold with little scope for recourse” at the moment.
Proving supervision is up to scratch
Carl Wallis, compliance and risk director at Sesame Bankhall Group, noted that one of the big areas of concern for the regulator was principals offering “regulatory hosting services”, where the AR is active in an area which the principal does not get involved in, or has little experience of.
He continued: “We don’t believe that the FCA’s primary concern is with traditional network models, but clearly all principals need to be able to demonstrate that they can appropriately supervise their ARs.”
Wallis also cautioned that the regulator has a balance to strike when it comes to introducing new rules for networks. He explained: “It’s important that any new rules do not overburden firms in terms of the volume of data they must provide to the regulator.”
Are networks asking the right questions?
Zaman argued there is more to being an AR than simply doing high volumes of business, and cautioned that networks need to do more than simply ask prospective ARs about their client bank and level of business.
She added: “It’s different when you are in an employed position, as everything is protected and controlled for you. But as an AR, nothing is controlled for you ‒ it’s your own business, but you may need help getting that business model right so that you give the client the best possible service. Proper communication from the network is vital ‒ it can be make or break between the AR being successful or falling apart.”
Bringing large and small networks in line
Wallis argued that traditional networks will typically have “well developed supervision models” that are likely to be broadly in line with the standards set out in the consultation paper.
He continued: “The FCA recognises the benefits of AR models – particularly in larger networks – in terms of their ability to provide robust monitoring mechanisms and support its engagement with firms. By engaging directly with principals, the FCA can extend the reach of its more detailed and complex messaging to a large number of smaller firms in a resource efficient manner.”
