Appointed Reps and DA firms
There was a small article recently regarding the network Tenet and a SIPP complaint lodged with the Ombudsman, some of you may have seen it, if you didn’t, here is a short summary……
Tenet, the Leeds based network was ordered by FOS to compensate a client that was advised to transfer into what turned out to be a “dodgy” SIPP which then was shut down. But the crux of the article really was not that, it was the theme that this network was trying to distance itself from an appointed rep (AR) and claiming that “no paperwork existed to show any regulated advice had been given and it had received no commission” it further argued that the advice given was outside of the scope of its responsibilities.
FOS thought differently.
Tenet claimed that they knew nothing of what this adviser was doing but from experience you are not permitted to carry on any advising business without it passing through them, they record everything on an internal system and as an adviser I believe you can’t get paid any other way - this is one way that they exert control and oversight.
This then poses the question, certainly to me, what level of control do Tenet or any network exercise over their ARs? From experience they are firm believers in strict control and that I believe is good. They are responsible for all the advice given by their AR’s, they have to be surely as they are the regulated entity and the AR is in essence, them! There is in my opinion no excuse for a network not having control over an AR and any business that they conduct, it is after all in the FCA conduct rules! What this article highlighted to me is an inherent weakness in the network model for many advisers. FOS ruled that Tenet were responsible for the advice to transfer and that ultimately the advice to transfer and the solution sold were so closely connected as to be one. I agree with that and I think most of you would say the same.
If you need the comfort of being told what you can advise on and when and what documentation you must use and having all of your work subject to strict “marking” criteria, coupled with paying a high fee with little or no flexibility then a network can suit you (and I am not being flippant regarding this, all of these are valid benefits for the right mindset) but if you answer no or not really to any of those then I feel you need to re-evaluate how you operate.
With the new SMR coming in very shortly, regulatory responsibility rests much more with you as the Business Owner/Director/Partner. I can envisage that networks will try to pass on SMR responsibility to their AR firms so that they can distance themselves from their business operation, after all they can’t possibly know how you run your AR firm all the time and so even from a practical point of view it seems they will want to transfer responsibility to you.
So then what we could be left with is an AR firm really only using a network for admin and compliance consulting in essence and for the price you will have to pay (rules and fees) for some this may be just too high and the value of networks like Tenet, may diminish as they seek to pass on risk down to you and your firm as one of their AR’s.
But overall my message here is, review why you went to your network and ask yourself these questions……
If the answer to any of these questions is a negative then it might be time to re-evaluate in light of SMR, where you should be with your business.