By Guy Holwill, Chief Executive of Fairbairn Consult
This article is a high-level summary of the matters that you need to consider if are thinking about moving FSPs. The items contained in this article will be unpacked in more detail over the coming months on the Fairbairn Consult LinkedIn page. Please follow that page if you want to know more.
New regulations are making advisers consider moving to a big brokerage where they can advise on a wide range of products without in increasing burden of compliance. Unlike the situation five or ten years ago, you now have a number of choices and it is important that you understand what you will experience if you were to join these businesses.
Every FSP has a value proposition for their advisers, which is everything that you get if you join a company. The main items are remuneration, benefits, infrastructure and support but there are also less tangible items such as reputation, culture and brand that you should consider.
When you engage the different firms be clear about what you are looking for and ask direct questions like:
- What happens if you want to leave? Get specific information on the financial impact and whether there are any restraints of trade.
- Are there any production targets or restrictions around the products that you can recommend?
- Are there internal referral options for lines of business outside your practice?
- Can you retain your own brand?
- How does the remuneration model work?
- Is the brokerage licensed for the appropriate product categories for which you are accredited?
- What governance and compliance mechanisms are in place?
Some businesses offer you lump sum payments when you join. Remember that “sign-on bonuses” are illegal and that nobody gives you money for nothing, so it is important that you understand what is expected from you in return.
Before you sign any contract, check whether there will be any restraints against you. If there are, be sure that you understand the implications of these terms before you sign the contract. Rather than traditional restraints of trade that prevent you from working in a specific industry, these usually take the form of a restraint against advising clients if you leave – which means that you are either trapped in that FSP or you will have to rebuild your client base from scratch.
The last thing to think about is whether the FSP has product suppliers in its group of companies. One of the things that RDR aims to clean up is FSPs creating the impression that they offer unbiased advice, when the reality is that their clients have a disproportionate number of group products. There is nothing wrong with advising on your group products, you just need to do it in an honest and transparent way, without any conflicts of interest.