In the advisory world, networks are never too far from the news pages and not a month goes by without someone adding to the debate about the long-term viability of the network model. As a network business it can get rather tiresome, especially when Stonebridge has just experienced a year of significant growth, increased business volumes across the board, and year-on-year improvement in profitability, internal investment and resource, but that seems to be the nature of the beast when it comes to being a network.
I am however the first to admit that the network sector has not always covered itself in glory yet the problems encountered and exhibited by certain individual networks at the moment should not mean that all businesses are tarred with the same brush. That said we should all be long enough in the tooth to realise that differing network models mean differing results and some are just as likely to hit the buffers as they are to steam off down the tracks.
2015 has kicked off in rather interesting fashion for the network sector and it will not take a genius to work out which networks have recently been described as ‘troubled’. Funding, profitability (or not as the case may be), compliance, etc, are worries for every single financial advisory business in the country however the potential for far wider (and bigger) problems is that much more worrying with networks because of the ‘global’ impact this can have not just on the ‘head office’ but every single firm and individual operating under the umbrella.
If you are sitting in your office as an AR of those networks that have been in the news recently, then you would be forgiven for thinking about what the future might hold for the network itself and your own business? Recent history is littered with the collateral damage inflicted on many advisory practices as their network went belly up leaving their AR firms considerably out of pocket and without a home. It is a sad state of affairs however we should all have become accustomed to it by now.
In our sector, troubling times for a network have serious consequences for many stakeholders and therefore it would be understandable if AR firms within these organisations were actively looking elsewhere. If that’s the case then it’s vitally important that the next move is not simply a case of out of the frying pan and into the fire. Back in those post-Credit Crunch days I fully remember firms being left high and dry by a particular mortgage/protection network, only to join another that – not so long after – also spectacularly bit the dust.
As an AR firm you should certainly know what you want out of a network and they will be the obvious – such as strong compliance support, access to lenders/providers, quality management, business development, the list goes on. However, one thing that should be high on anyone’s list is the financial stability and the profitability of that network, and we are not just talking about access to a parent with deep pockets because as we’ve seen just this month, this is certainly no guarantee of sustainability or longevity. Instead, ARs need to understand that the network can stand on its own two feet and is a profitable business which actively assures its own existence every single year. That’s certainly the model we’ve followed here at Stonebridge.
If a network is making a profit – and importantly that profit is solid and preferably growing – then it has the cash reserves in order to invest in, and grow, its own infrastructure and to be continually fit for purpose. AR firms, when choosing a network, should feel confident that the network is in a good place not just now but also that in five, 10, 15 years down the line it will still be able to fulfil their needs. If you do not get that sense from a network and, rather importantly, the company’s figures read incredibly different from their marketing, it is a sure sign that your business will find a better home elsewhere. Make sure your due diligence is spot on and give yourself every chance of making the right decision.
Richard Adams is managing director of Stonebridge Group
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