"ARs are definitely getting stung by this. While trying to leave a network can cause a variety of problems, one of the biggest issues is around client ownership."
We’re currently receiving lots of enquiries from brokers looking to join the Rosemount family which is great news for us overall, but it’s also raising some interesting issues.
While the latest Network League Table encouragingly shows net growth in the overall number of appointed representatives across the top mortgage networks (as defined by the study), there’s also a fair amount of movement between principal firms.
The study found that 442 appointed representative (AR) firms left networks during the first half of 2024, while 574 joined.
There are many reasons why ARs switch networks. They could be looking to expand into new products or services, such as financial planning, they might want a better suite of software solutions, or perhaps they want to move to a larger or smaller firm.
There are also those situations where firms are no longer happy with the level of support they are getting from their network. Maybe promises haven’t been delivered or their business isn’t growing as they’d hoped, and so they start looking for a new home.
Whatever the reason, the whole process of leaving can be much more difficult than it needs to be, especially if a network’s terms and conditions haven’t been fully read or understood at the outset.
The client ownership issue
ARs are definitely getting stung by this. While trying to leave a network can cause a variety of problems, one of the biggest issues is around client ownership.
We’re seeing more scenarios, particularly between larger principal firms and advisers, where contracts state the network retains ownership of client accounts when the adviser leaves.
Restrictive terms and conditions like these are effectively seeking to stop advisers moving from one network to another.
It means leaving is not only difficult financially, because you can have situations where fees are stopped and access to systems blocked, but also commercially, if there’s a risk of losing their clients as well. Yet these could be clients the adviser brought to the network with them in the first place, after investing years of time and effort in those relationships.
Unfortunately some of these problems only come to light when advisers look to move. So we would strongly urge anyone joining or moving to a new network to read the small print about client ownership very carefully first and, ideally, get a solicitor involved.
Do your homework
It’s vital for any adviser to really do their homework, and establish where they stand, before selecting a network.
One area that can be easily overlooked is how the commission rates are calculated. It is always a good idea to ask for an exemplar insurance illustration, which details the total commission paid by the provider to the network, and from here determine what the commission splits would be. Before you sign on the dotted line, you need to be confident in understanding how much of the total payment you will actually receive.
Another important check is whether the network is truly independent or vertically integrated in some way, for example with a discretionary fund manager or platform. If it’s the latter, then there may not be the same freedom for advisers over the products which can be offered, while if you do part ways, they could then make it difficult for you to service your clients. It’s an issue we have seen first hand in the past, and the transition for the adviser away from that network proved particularly challenging.
There’s no better way to get a feel for how a network operates than by speaking directly with its existing advisers. If you are considering a network, it’s a smart move to use the FCA register to pick out a couple of advisers who are already members and ask them about their experiences. You can mix and match, perhaps by selecting one who has been there a long time and a recent joiner, to get a more comprehensive impression of what the actual experience of advisers is, allowing you to make a more informed decision.
Thriving market relies on happy advisers
Even if everything sounds and looks great on first impression, it’s still important to consider how easy it would be to move in the future because you just never know what could happen. It’s impossible to predict exactly what support your business is going to need throughout its growth journey, or when it comes to retirement planning.
At the same time, it’s not healthy for advisers to feel trapped. The idea of moving shouldn’t feel like an insurmountable task.
One size doesn’t fit all and, for the market to thrive, advisers should be free to choose a network that is the best fit for them at the various stages of their career journey. Equally, customers should have the freedom to choose an adviser they trust.
Fortunately there are a number of things a new network can do to help, and we will always assist brokers in making their transition to Rosemount as smooth as possible – even when navigating tricky Ts and Cs.
For example, a network can novate on-risk policies and indemnified commission across, so we take the liability. In individual cases we can also help the broker with cash flow, similar to a bank overdraft facility, which can be a vital lifeline during the transition period.
The bottom line is concerns over contract issues shouldn’t stop advisers from moving networks if they are not happy with their current situation.
Having the support of a network that cares about your business and its potential at all stages of your journey – including if you decide it’s no longer the right fit for you – is paramount.
