Danny Walkinshaw says broker networks are growing, but do brokers need to join?
When a broker network is compared to a Gucci handbag or an iPhone, it raises the question, just how big can networks grow?
John Kitson, intermediary business director at Norwich Union, made the comparison when he said that networks are the “new must-have fashion accessory”.
His comments related to the attraction of networks for consolidators, but it appears it is not just that the current networks will get bigger – but, as rumour has it, more networks will join the fray.
Last week, the Purple Partnership was born. It is the newest broker network and will be managed by former Westinsure network managing director Bob Parkins in collaboration with Jelf.
Jelf Group chief executive Alex Alway will chair the new venture that will see a consolidator looking to tackle the network market from within.
So why has a consolidator decided to start up its own network? One answer is, why spend millions buying a network, when you can start one yourself. A broker which has access to markets and can offer IT and compliance is well placed to create a network.
Jelf has all these attributes and has chosen an experienced network professional in Bob Parkins to steer it in the right direction.
A consolidator might also see creating a network as a more viable option than acquiring a broker to distribute its schemes. The alternative is to have a number of hungry independent brokers to distribute their products, without owning them.
Last week also saw Layton Blackham Business Solutions (LBBS), the broker network owned by AXA, unveil ambitious plans to become the leading network within three years. LBBS has 50 members, and is looking to take on the likes of Broker Network to grow to 200 members.
The market is split on the sustainability of networks. Broker Network chief executive Grant Ellis said that there will be room for only two or three in the future.
But Steve Burrows, the Cobra Network chief executive, is adamant that they are key to the future and welcomes the arrival of new start-up networks.
“So why has a consolidator decided to start up its own network? One answer is, why spend millions buying a network, when you can start one yourself
He recently commented: “It is good to have healthy competition between networks. It brings more into the market and it is inevitable that we would get more networks. You have to start a network that is good, because there is no point in starting a ‘talking house’ as anybody can start an alliance, that is easy.
“A network has to produce value and you have to have lots of network so they can compete with each other.”
Ellis, like Burrows, has criticised alliances in the past, claiming that they are of no benefit to brokers.
He said: “There is no sustainable value added for insurers, so there is little point in joining. The only reason alliances exist is to drive up commissions. Unless they come up with a concerted approach to bring pressure on insurers, they will fade.”
Quite the opposite for networks, which claim to be the survival option for brokers. But what is stopping the many brokers out there who have yet to join?
It is feared that brokers will lose their independence and, as long as they are performing well on their own, they are happy. But network bosses are warning small brokers to look to the future.
Burrows thinks they have nothing to lose by joining early and stabilising their future.
He said: “I have a big problem, I can’t understand why, if a small broker sees a network, it doesn’t join.
“To remain independent and to have reducing commissions and insurers dealing with it by phone, seems to me a more difficult way of running a business than it could have if it joined a network.
“It loses nothing, because it can only gain, it amazes me really. It is about spreading the word.”
That word is spreading, and the Purple Partnership is out to prove that there is a place for more networks. Watch this space.