Striking out on your own as an adviser can prove daunting – most will not know where to start and in an era of increased remote working leaving colleagues to go it alone can prove a lonely experience.
Consequently, for many, networks provide a natural solution to that problem.
They can offer community and increasingly these days – recruitment and training support services.
But in the new era of Consumer Duty and as increased automation takes hold in addition to the Financial Conduct Authority’s (FCA) Pure Protection Market Study, networks are also providing more help to advisers as they attempt to wrestle with all of this regulatory change.
However, there has also been increased scrutiny of the appointed representative (AR) model itself from the regulator.
And while becoming directly authorised is a route for those that do become dissatisfied with their network, this is not always an easy route to take.
Consequently, strength in numbers means that networks are here to stay, but they must continue to adapt to the increasingly evolving needs of their advisers.
Seeing a shift to appointed representative
“We are seeing a shift to AR from directly authorised,” Neil Hoare, sales director at Primis owner LSL Financial Services, tells Health & Protection.
“Whether that is as a result of Consumer Duty focusing the mind on outcomes or, in the case of one firm, the opportunity to develop their firm’s outreach but not wanting to have to risk the recruitment process and sourcing the network as an HR partner.”
Demand for advice continues to grow and with the the sheer volume of customers needing advice and Hoare adds finding new advisers is crucial to the future prosperity of many firms, and being able to outsource to find the right people is a real benefit.
“For networks such as Primis, we know that simply providing a mortgage and protection panel, or a payment route, doesn’t add to the value of the relationship,” he continues.
“Networks must now offer so much more. Help on tech, social media and yes, attractive commercial arrangements, which in turn create clear differentiators for a new firm looking for the right network partner.”
Sense of community for remote workers
The pandemic brought about a desire for people across the country to reassess their lives and strike out on their own.
The protection sector was no different and according to Hoare, since Covid, the network has seen a shift with many brokers choosing to work remotely.
“The word ‘remote’ can be true in both senses of the word,” he continues.
“Brokers are connected but simultaneously they may feel cut off from industry peers and contacts.
“Networks offer a sense of community, a connection to a wider group of like-minded individuals, and a chance to build relationships with firms who share the same aspirations and goals.
“A network creates the caring and sharing environment which helps give focus and answers many difficult questions such as how will tech impact the advice process? How can I build my business and what are the pitfalls to avoid?
“After all, there are people in networks who will have made the mistakes that many firms will encounter. Network and broker collaboration helps those firms to learn from others and avoid those mistakes. The one key message is – you are not alone.”
Clear entry point
That message particularly resonates with advisers starting out and it is clear networks can create an important entry point – even if they eventually choose to go down the directly authorised route, according to Alan Knowles, co-managing director at Cura Financial Services.
“Before becoming directly authorised in 2016, I spent 11 years operating as an appointed representative of a network,” Knowles said.
“For us, being part of a network gave us a clear entry point into the industry.
“They provided training, knowledge and compliance support. If we had gone straight to direct authorisation from day one, the application process, regulatory requirements, and ongoing compliance would have been daunting.”
Choosing the right network
But choosing the right network to suit an adviser’s needs remains a really important decision, according to Joanna Streames, owner of Velvet Mortgage and Insure Services, who reports that there is a wide difference between culture and support within networks.
“I personally like the support and the sharing of the network I am with,” Streames says.
“That is very important to me because I like to build a community where we can all benefit from each other’s knowledge, experience and sharing of good practice and so on.”
The decision is also important as it is difficult for advisers to become directly authorised, Streames adds.
“It is also very difficult to change networks and all of these things seem very unfair towards advisers.
“The majority of us absolutely do a good job for clients with, of course, some exceptions. However, these are, I believe, in the minority.
“It seems the minority then affects the majority and it causes an almost intolerable amount of pressure for many to do this job.”
Regulatory pressures
That pressure on networks has come in the form of increased security from the FCA, with its work in recent years to improve oversight of appointed representatives and its spotlight on restricted panels in its ongoing Protection Market Study.
And Streames maintains that networks can pass this pressure directly to advisers through compliance checks and communications.
“Increasingly, I have seen capable, ethical advisers experiencing anxiety and burnout simply for the cumulative level of scrutiny,” Streames continues.
“I think our industry is unique in this and it isn’t good. We all want to treat customers fairly, but I feel strongly we also need to be treating brokers fairly and try to lean more to support rather than constant fear of getting something wrong in an ever-shifting regulatory environment.
“The emotional and mental health impact is real, visible and largely unacknowledged.”
Making networks relevant
But compliance pressures are also making network membership more relevant, according to Kristian Breeze, director of healthcare at Ascend Health.
“Demand is being driven by regulatory intensity rather than commercial advantage alone,” Breeze explains.
“Consumer Duty, the FCA’s increased focus on principals and appointed representatives, and rising professional indemnity costs have all sharpened the appeal of shared infrastructure and oversight,” he continues.
“There is also a generational shift. Younger advisers are often less wedded to the idea of standalone firms and more comfortable with operating within a framework that provides technology, compliance and peer support.”
For Breeze, network membership increasingly means risk mitigation rather than growth acceleration.
“Networks absorb a significant proportion of regulatory responsibility, provide structured compliance oversight, and offer access to specialist resources that would be costly or impractical to maintain independently,” he continues.
“This matters more than ever in light of the FCA’s Pure Protection Market Study and Consumer Duty, both of which place greater emphasis on evidencing fair value, suitability and ongoing monitoring.”
Prepared to intervene
According to Hoare, a network must set the rules, monitor the outcomes, and be prepared to intervene where needed.
“All networks need to be transparent in their supervision, be careful over trading styles that might confuse the customer and generally assess the financial resilience of its membership,” he adds.
“There are no more large ARs sitting behind small network models or customer confusion over who they are dealing with.”
Hoare adds the FCA’s AR regime guidance paper spelled out the responsibilities that a network has over product governance, advice models and the use of incentives to increase productivity.
“There is now more focus on recruitment and the need to get new adviser and firm applications right first time,” he continues.
“All networks have reviewed their on-boarding processes to deliver a smoother journey for all.
“Ultimately, the control of customer outcome sits with the Network, the FCA has crystalised this outcome, and are judged by a number of KPIs [key performance indicators] such as customer outcomes and quality of data gathering to make an informed decision.
“I’m sure no-one sets out to deliver a poor customer outcome, but in today’s world you have to prove it with meaningful data that backs up the claim.”
Panels must reflect the needs of the market
Earlier this year, in its Protection Market Study interim report, the FCA pointed out that restricted insurer panels can be used as an intermediary strategy to negotiate higher commission rates.
And touching on restricted panels, Hoare reflects that it was interesting that they have not been targeted by the FCA.
“It could be argued that reduced consumer choice, combined with higher market shares for insurers which deliver high commission rates could lead to a poorer customer outcome.
“And of course, there is the loaded premium argument. Why should money be diverted to higher commission rates rather than more cover for customers?
“How many customers have not had income protection because a proportion of the customer’s budget that could have gone on cover goes to pay more to the distributor?” he asked.
Hoare maintains panels should reflect the needs of the customer, not the needs of the network and its commercial model.
“It’s about time that we recognise that advice should reflect what’s available in the market, not what the distributor says the broker can advise on,” he continues.
“How many customers will have received a close enough outcome because the right outcome wasn’t on panel?”
Raising standards
The appointed representatives regime has come under the spotlight of the FCA and in September 2024, the regulator revealed its action resulted in principals terminating relationships with 650 ARs.
For Jo Pawson, head of protection at New Leaf Distribution, the increased scrutiny from the regulator of ARs has raised standards across the market.
“For networks, that has meant stronger oversight and clearer accountability – but it has also reinforced the importance of proactive support rather than reactive intervention,” Pawson says.
Pawson further maintains that at New Leaf, panel design is driven by client outcomes and proposition integrity.
“Broad, credible panels matter, but so does strong governance,” she continues.
“The direction of travel is away from commission-led decisions and toward sustainable, long-term value for clients.”
Making regulation manageable
But Pawson also contends that a well-run network should make regulation feel manageable rather than overwhelming.
“With the FCA’s Pure Protection Market Study reinforcing the importance of value and outcomes, networks can play a key role in embedding protection earlier, improving advice quality and moving away from transactional conversations,“ she continues.
“AI presents a real opportunity for advisers, but only if it’s used responsibly.
“Networks have an important role in setting clear guardrails, helping advisers understand where technology adds value while protecting suitability, data integrity and client trust.”
And according to Pawson, that important role looks set to continue.
“Networks absolutely have a future, but that future belongs to those that evolve,” she continues.
“The most valuable networks will be those that move beyond being compliance umbrellas and become true partners in advice delivery.”