The Fastest-Growing Network Isn’t Necessarily the Best Network

When looking at the network market, it’s natural to notice the firms attracting the largest numbers of new Appointed Representatives.

It’s something I look at closely when compiling the Network Consulting League Tables, and as I write this I’m getting ready to pull the latest data for Q3 ahead of the next update.

Growth is interesting. It can tell us something about momentum in the market, the appeal of a proposition and where advisers and firms are choosing to move.

But there is an important distinction to make.

The fastest-growing network isn’t necessarily the best network. Equally, the network with the most AR firms isn’t necessarily the best either.

In fact, I’d go one step further.

There isn’t a ‘best network’. There is only the network that is most appropriate for the individual adviser or firm and what they are trying to achieve.

What does network growth actually tell us?

The Network Consulting League Tables track firms joining and leaving networks, providing an interesting picture of movement across the market.

Sustained growth may indicate that a proposition is resonating with a particular type of adviser or business. It could reflect changes to pricing, technology or support, successful recruitment, acquisition activity or a particular strategic focus.

But the numbers alone don’t tell us why firms joined.

And they don’t necessarily tell us why firms left.

Changes in ownership, consolidation and acquisition activity can all influence the numbers. Networks may also change their appetite for particular types of business or become more selective about the firms they accept.

That’s why movement needs context before conclusions are drawn from it.

Recruitment and retention can tell different stories

Headline net growth can disguise what’s happening underneath.

A network may recruit a significant number of firms while simultaneously experiencing a relatively high number of departures. Another might recruit fewer firms but retain a much greater proportion of its existing businesses.

Both could show positive net growth, but potentially tell very different stories.

That’s why looking at joiners and leavers separately can sometimes be more informative than concentrating solely on the net movement.

And for that matter, rapid growth can also bring challenges of its own.

As a network expands, its infrastructure needs to expand with it. Compliance resource, operational support, technology and service teams all need to keep pace.

That doesn’t mean rapid growth automatically results in service issues. But, if recruitment outpaces investment in infrastructure and resource, it can potentially put pressure on service levels and adviser satisfaction.

The push can be as interesting as the pull

When looking at firms moving between networks, I often think in terms of push and pull factors.

What caused a firm to start considering leaving its existing network?

Was it service, cost, technology, proposition change, ownership, culture or simply that the firm itself had evolved and its requirements had changed?

Then there is the pull.

What attracted it to the new network?

Those are two different questions.

Strong recruitment figures may tell us that a network’s proposition is proving particularly attractive. But they may also tell us something about what’s happening elsewhere in the market.

For me, understanding those underlying movements is where the numbers become particularly interesting.

Look beyond the headline charge

Cost will inevitably form part of any network comparison, but comparing propositions isn’t simply a case of looking at two percentage figures and choosing the lower one.

Charging structures can be complex.

Depending on the proposition, they may incorporate percentage deductions, fixed fees, additional fees for technology, PII and file checking, equally there may be  minimum monetary retention levels and additional charges for particular services.

Two networks displaying apparently similar headline percentages could therefore result in quite different actual costs depending on the size, shape and production of the business.

Cost is only one part of the decision, and should not be the main one.

Compliance approach, technology, service levels, support, product proposition, financial strength, ownership, culture and contractual terms can all be important.

The weighting given to each will be different for every business.

Understand the proposition on the way out as well as the way in

Some aspects of a network proposition may not seem particularly important when joining, but can become extremely important later.

What is the notice period?

What happens to your clients if you decide to leave?

Are there restrictions that could affect what you do next?

Are there exit charges or continuing liabilities?

What are the arrangements surrounding Professional Indemnity Insurance and any potential run-off cover?

A proposition can look extremely attractive on the way in.

It’s worth understanding what it might look like on the way out too.

Ask the questions that matter to your business

When speaking directly with a network, you’re naturally hearing about the proposition from the network’s perspective.

Recruiters understandably focus on the areas in which they believe their proposition is strongest.

But those may not necessarily be the areas that matter most to your business. Equally, something relatively unimportant to one adviser could be critical to another.

The questions you ask can therefore be every bit as important as the information you’re given.

Before comparing networks, I think there are three simple questions worth asking:

What must I have?

What would I like to have?

What do I definitely not want?

One business may place technology and integration towards the top of its list. Another may prioritise autonomy, culture or breadth of proposition.

Someone establishing their first firm might value more hands-on support, while an established multi-adviser business may place greater emphasis on scalability, service levels or commercial terms.

And those priorities can change as the business develops.

That’s why choosing a network predominantly because it appears to be where everybody else is going can be dangerous.

Their reasons for choosing it may have very little to do with yours.

So why publish Network League Tables?

Because market movement matters.

Looking at firms joining and leaving networks can highlight trends, changes in momentum and areas worth investigating further.

Viewed over several reporting periods, the data can help us understand how the shape of the network market is changing.

Once again I underline this – the Network Consulting League Tables are not intended to be a ranking of the ‘best’ networks.

Number one doesn’t mean best. Growth doesn’t mean best. And a fall in numbers doesn’t automatically mean a network has a problem.

I see the tables as market intelligence — a way of identifying what is happening and, importantly, prompting the next question:

Why?

Understanding what sits behind the movement is where the numbers become considerably more interesting.

Ultimately, choosing a network should come back to something much simpler:

Where is your business today, where do you want it to go, and which proposition provides the most appropriate environment to help you get there?

That’s a much more useful question than asking which network is currently growing the fastest.

Q3 Network League Tables coming soon

I’m currently compiling the latest Network Consulting League Tables covering the mortgage, wealth and equity release markets.

I’ll be publishing the updated figures very soon, together with my observations on some of the more interesting movements within the data.

As always, I’ll be looking beyond simply who has gone up or down and considering what may sit behind some of those movements.

Considering your network options?

Explore the Network Consulting Network Directory and League Tables, or even better, get in touch if you’d like an independent conversation about your own requirements.