Some of the UK’s most successful advice businesses are set up as either national partnerships or networks, but to an outsider it can be hard to tell the difference between the two structures.
Both self-employed registered individuals within a national partnership and advisers within a network can access the services and support provided by the parent company, including marketing support, paraplanning, compliance and administration.
Both also still have the autonomy to make their own plans, decisions and to determine their own direction of travel in growing their business.
However, there are also many core differences between the two models.
National advisory businesses typically offer a common consistent client charging structure throughout the business. Businesses within network models on the other hand are typically free to create and operate their own client fee model as long as it sits within the parameters of a network's pre-set limits.
Unlike a network, a national partnership asks advice businesses to operate as one brand and identity, with the advisers working as part of the same business and representing the traits desired by the company as a whole.
This builds consistency within the business and consistent client delivery across the country as everyone operates in a uniform manner.
Under a network structure, each business acts independently and can develop its own brand identity. This does mean differences between network members' service costs and delivery across the country.
When clients deal with a member business of a network they are dealing with just that member, whereas where clients deal with a member business of a national partnership they are effectively dealing with the whole partnership and not just the adviser in front of them, as there is a connected community within the partnership.
This is why some businesses choose a national partnership model rather than as a network; under a network structure, some businesses may feel they would struggle to generate an ethos of collaboration and identity.
Making the right choice
Therefore, as an adviser looking to start up on your own, when considering if you would rather join a network or a national partnership, you need to ask yourself if you want to be part of a fully supported collective or are you just looking for some support.
There are also differences between the way networks and national partnerships typically address centralised investment propositions.
CIPs are unique to each individual partnership business, mainly because many nationals will produce a different target market assessment.
In networks, which effectively offer a support service, generally speaking they will provide a prescriptive model for their restricted advisers, and usually offer a framework for their independent financial adviser community.
Each IFA business within a network will typically be responsible for assessing and determining client needs and wants specific to their own client base, effectively creating their own CIP within the framework offered. The network will then have the responsibility to sign off and provide continuous oversight for each individual CIP.
There are also differences in terms of what is required from a legal and taxation perspective.
Advisers in a national partnership have to meet the compliance and regulatory requirements set by the parent company but are typically self-employed. Therefore, they are responsible for their own taxation.
The main difference between a national partnership and a network from a compliance perspective is that partners are registered individuals, whereas advice businesses within a network are appointed representatives.
In the case of an appointed representative as part of a network, the business and its advisers will still be required to demonstrate that they can competently conduct regulated business in accordance with the Financial Conduct Authority standards.
However instead of holding the regulatory responsibility themselves, the network, which is the directly authorised company, has that responsibility and is the principal company that is accountable to the FCA for the actions of all the ARs registered within it.
Registered individuals, on the other hand, work for directly authorised national partnership companies, either as an employed or self-employed adviser.
Typically, the wider partnership will set compliance standards that the advice businesses must meet, but it is responsible for regulatory compliance in a different way to that of networks.
Acting under one brand as part of a national partnership model can also hold advantages when it comes to securing professional indemnity cover due to the uniformity of approach.
At some businesses, PI is arranged centrally and advisers benefit from the real value in one common national brand with common, controlled processes.
A culture of equality
Having a good culture is important in any advice business, not least because the regulator keeps a keen eye on it.
Some national partnership models allow advice businesses to create a culture where the client, advisers, back-office staff and business as a whole are of equal importance.
Experience tells us it can sometimes be difficult for a network to embed culture alignment in their companies as each business will have its own culture.
Overall, while there are many similarities between network and national partnership structures, there are some core differences that set them apart from one another.
When choosing which path to travel down for yourself and your advice business, we always recommend that you talk to a few advisers who joined either a national partnership or network. Do this before deciding which is right for you and you can establish the reality of the model and the business you are considering to join.
Darrell Stone is head of partnership development at national IFA partnership Continuum
