There are several factors that have stimulated the appointed representative (AR) recruitment market in recent months.
• Regulatory pressure on small directly authorised (DA) firms with an increase in FSA visits and monitoring
• AR’s of smaller IFA networks, who are mortgage and non-investment life advisers, find the costs prohibitive as they are subsidising pension and investment advisers of those networks
• Dissatisfied AR’s of mortgage networks, mainly due to service and erratic payments, prepared to consider switching to other networks
• Newly qualified mortgage advisers who were previously introducers, or making a career change
• Mortgage networks closing down due to insufficient numbers of AR’s
Each of these factors have individually and collectively driven the appetite for AR recruitment across networks, with defining reasons behind each one.
DA brokers
Although DA brokers do not have network charges to pay, they are likely to be earning less commission and proc fees, as they are not able to ‘bulk purchase’ from providers.
Additionally, they pay annual FSA fees, and professional indemnity premiums, which are based on an individual risk basis and therefore do not attract block discounts. Many DAs are paying for outsourced compliance, but are still left with the direct responsibility and accountability.
In short, costs are not such a restrictive factor as might be envisaged, when seeking to recruit from this sector.
ARs of IFA networks
The costs of providing professional indemnity cover are relatively high, as ‘mortgage only’ members are subsidising the costs of advice provided by investment and pensions sellers.
These networks have limited or no dedicated packaging and mortgage club offerings. These factors can restrict opportunities to grow businesses and make ARs less entrepreneurial, as they feel they are working for another organisation, rather than running their own business.
Many of these networks have minimum targets to achieve to retain membership.
Existing network ARs
Concerns over the regularity and accuracy of commission payments, contribute to fears about the long-term survival of their network. Poor service levels contribute to overall feelings of dissatisfaction.
Clarity regarding top slicing of proc fees and life commissions fuels additional concerns. Networks advertising ‘monthly fees only’ are failing to make clear the areas where they make their money. Some top slice amounts of between 10-20 per cent of prime proc fees.
Newly qualified advisers
These ‘new ARs’ are needed to bring new blood into the industry. Unfortunately, although there are a number of academy schemes available through networks, they tend to concentrate on achievement of qualifications only.
New ARs often fail in this area, as they do not always receive the correct level of training and support necessary to develop their businesses.
Some networks have shown massive growth in numbers, but have yet to prove that the businesses are sustainable and are able to survive in difficult trading conditions.
Network closures
Networks who have not achieved the critical mass they hoped for have closed. With insufficient numbers, they have been unable to make the network profitable.
Many have reverted to their original core business, such as insurance and packaging and sacrificed their tied distribution for an assumed greater margin at lower costs of acquisition.
Although the number of networks has fallen, and rising costs have affected everyone, most networks now offer a wider range of services and providers, both for mortgage and protection business.
In current market conditions, diversification is key; therefore other services such as commercial, secured loans and bridging finance are being added to a number of network propositions. Technology is also enhancing some network offerings, which is making e-trading more prevalent.
There are definitely as many opportunities now to recruit new ARs, as there were during the period leading up to ‘Mortgage Day’.
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