Financial Ltd’s closure comes after a difficult few months for the network sector. Earlier this year L&G announced it would be “moving away from its AR model” to focus on directly authorised business while Sesame has undergone a huge restructuring. Meanwhile, of course, the Financial Conduct Authority was less than complimentary about the way in which networks are supervising their ARs in its recent report into advice in the industry.
We are also seeing some networks hiking member fees to try and cover costs and remain profitable. Amid all this one can’t help but wonder why brokers are choosing to stay with networks and not looking into the options available to them should they become directly authorised.
Don’t get me wrong. I understand that changing status would involve a certain amount of upheaval and when ARs are busy writing business it is natural to stay put rather than go through the hassle.
Furthermore of course, it can be difficult for ARs to leave if networks hold back the run off commissions, meaning brokers could be without income for some time until a new pipeline builds up.
But with industry commentators already hinting that the current network model no longer works and some lenders appearing to question the previously held thought about the apparent quality of business in the AR world over DAs (and adjusting proc fees accordingly) now is surely the time for ARs to start looking at the other options available.
With help and support there is no logical reason why a broker should not become a DA and therefore be in complete control of their own destiny rather than allow their fate tobe dealt by distant third parties.
There is an abundance of support on offer from lenders and, indeed, from mortgage clubs, in terms of compliance and technology so brokers need not feel daunted at the prospect of ‘going it alone’.
If you do choose to maintain AR status, be sure to do ongoing full due diligence and check the network’s financial stability. Remember, member numbers alone do not necessarily translate to a solid and lasting financial business partner relationship.
