Networks need to change for them to thrive
This stark warning comes from new network First Complete, headed by managing director Jon Round and LSL Property Services business development director Mark Graves.
Both Round and Graves are firmly of the opinion that the network model needs to change to survive and prosper in the new market. They define this “new” market as being one where selling skills are vitally important for brokers, who are faced with restricted product supply.
“It’s no longer enough for networks to charge peanuts and churn volume – doing that won’t deliver quality business to commercial partners, and it doesn’t help appointed representatives at the other end of the relationship either,” said Round.
First Complete, the rebranded Home of Choice network that was bailed out of administration by LSL Property Services in May this year, is reviewing its business model with a view to helping its ARs develop their own businesses and ultimately rebalance this split.
The network is holding a series of training workshops over the coming months for ARs who want to improve their selling skills, learn more about how to sell products such as protection and general insurance, and engage with the network about how to streamline their own firms.
Round said: “In the past there were networks which were seen as ‘cheap as chips’ but the service they delivered was on a par with that. We’re trying to innovate in the network sector and help more of our ARs do more business by helping them understand what their own business strategy might be and how they can be more efficient.”
Gemma Harle, managing director at network TenetLime, agrees with Graves and Round that the old model doesn’t cut it in today’s slimmer market.
She said: “There’s a value in what networks provide and we should be offering quality services and quality support to our ARs; there is a cost attached to that and there should be. ARs have to accept that you get what you pay for.
“I do think the model is changing – it isn’t about AR numbers, it’s about long term relationships and working in partnership. Tenet supports its ARs through training, assistance with recruitment into their firms, ongoing training support, as well as exclusive products.
“And there is also the business development aspect to what networks can offer, for example advice and expertise on business buy-outs if that’s what ARs want to do. The service has to go beyond just providing compliance services. It’s our job to help our members survive – if they don’t survive, we won’t survive.”
Graves said: “This new model is about helping ARs develop lifetime clients through training rather than churning sales.”
And Round added: “A lot of brokers are already recognising this, but the new market should be a service led industry rather than being seen as a sale each time.”
David Copland, managing director of network Pink Home Loans, said he fully agreed with First Complete’s philosophy, adding that Pink has always operated with that in mind.
He said: “Networks have to be all about the added value and service. The big thing we offer is compliance, IT platforms and help for brokers to do business more effectively, but there’s also business protection training and development courses.
“At Pink we’ve also looked at giving our ARs administration support. The credit crunch meant lots of smaller firms had to cut costs and centralised administration and accountancy services could be something networks can help with.”
Mark Graves added that helping brokers to improve their cross-selling techniques and business efficiency would benefit them as well as the network. He said: “Anecdotally there’s the 80:20 rule where 20% of your ARs deliver 80% of the business going through a network.
“I’ve heard stats that put that divide at a startling 2% of advisers delivering 53% of the network’s business. That’s inefficient and clearly a network operating like that isn’t giving its ARs the support they deserve.”
But Copland said the 80:20 rule is part of the nature of networks. He said: “Quantity of business doesn’t necessarily mean quality of business – we have some ARs who write small volume but it’s excellent quality.
“I think there always has to be that bottom 80% – that’s the feeding ground for your top 20% of the future. But I do agree that networks should be about training, training, and training now.”