Cover
Place your bets
First there was MMR, then Fraudscape, then know your broker. Now it seems the market has moved on and networks are under the microscope. Sarah Davidson reports
The world is split into two kinds of people. Gamblers. And those who’d rather keep the hundred quid in their pocket than risk losing it all for the chance to double it. Choosing how to run your business may not pose as big and obvious a risk as sticking that hundred quid on red to win but it is a calculated gamble nonetheless. Many go through different guises in the lifetime of their business – often starting out as an adviser in a larger firm, graduating to appointed representative and finally taking the plunge to go fully independent and directly authorised. For many that path is dependent on experience and also the level of risk they’re willing to take. In today’s market, rife with a complaints culture and the regulator’s move towards demonstrating audit trails and accountability, that risk is synonymous in many ways with the level of responsibility a firm takes for its compliance.
That that risk is increasing and so is the cost to cover it. The recent demise of Honister Capital is a sobering reminder that professional indemnity insurance can cripple a business. And last year’s move by the Financial Services Authority in its Fraudscape paper forcing lenders to “know” their distributors better is an added pressure on networks. A practical outcome of this has been linking distribution rewards, proc fees and exclusive product access to case quality. That in turn comes back to compliance again, and it has its own cost implications for networks. And all this in an environment where
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