Lighthouse reports soaring losses and takes £3.9m network hit

And they'll soon have to spend another half a million changing their stationery from FSA to FCA, another stupid regulatory cost

As a Network memeber I am not overly concerned ref the Arch Cru as the group will likely claim any payouts back fro the relevant advisers (disgustiong and all as this whole Arch business is). As for the other issues regarding the provision for potential historic advice, again I am not concerned as this is only a provision and not indictive of any actual amounts to be paid. The FSA agreed with the Network a igur of £100K per year of trading for the old Falcon biz etc and at 30 years of trdaing arrived at 3 Million as a provision. The balance sheet is still strong and a lot of costs are now out of te way. I was not aware of the significant loss of advisers and the 9% drop in income. That is more serious. I trust in the board to bring about the relevant actions to turn the firm around within the next 2 or 3 years.

Dress the figures up how you want if a sole trader was losing money at the same rate as some of these networks they would be long gone.

Whilst it may be all historic business and past advisors that are to blame for the losses, and yes they may be only back of a fag packet calculations done for the FSA, however they are still losses.

Something will finally tip them over the edge.

@World gone Mad - As an ex Lighthouse / Falcon member my feeling is that they are focusing on the National IFA network and that ultimately the network will wither on the vine. Personally I can't see how any network will be able to maintain full independent status, there is simply too much risk for the network with that business model. I suspect that a lot of networks will become restricted with centralised investment propositions etc

Is it not an irony that Fay Goddard, one of the great advocates of RDR & former chief executive of the Personal Finance Society (PFS), is to join Lighthouse Group as a non-executive director?

Perhaps Fay will be able to turn loss into profit?

I hope Lighthouse make it through what looks like a troubled past 12 months. For what it's worth, I think they're a good bunch.

@ Simon

Any port in a storm

The lighthouse has offered a welcome haven, ironically a storm created by RDR, one of the greatest advocates......... (as you said)

I expect the network will disappear, leaving the well respected sole trader together with the big restricted firms like SJP and Towry, running their own funds.

Has any network or national IFA business ever made any money for its investors (and not just for a few months)? You have to question the motives of those who invest in them - surprised that the FSA hasnt looked at this more closely. Why does Friends Life own Sesame, and why does Aegon own Origen? They werent good investment decisions, were they?

Keith, I think you are right, more is the pity. Those who sold Arch Cru etc within a network were probably salespersons first and advisers second and will find a natural home in the restricted firms, as selling an in-house risk managed fund requires has no real expertise. But does it really benefit the client?

@Philip Wise Mar 20, 2013 at 11:34

Shareholders and corporate law actually dictated the response of Network directors to RDR, they kept quite because they saw gains and profits! Now those that have not sold out to poor quality product providers are now in trouble as RDR comes back to bite them. This also explained the Silence also of AIFA, where those same Networks made up most of the AIFA Council!

The history – less we forget! If an IFA’s business has income of say £100K 50/50 initial and trail and a Network takes 15% then the Network earns £7,500 on initial and £7,500 on trail i.e. £15K per IFA member.

If as AVIVA predicts, 50% of IFA’s are binned post RDR 2013 and onwards then the Network will lose the 15% on initial (£7,500) but gain 100% on trail i.e. £50,000. The entire trail reverts back to the Network so instead of earning just £15K they then take 100% of the trail i.e. the Network gains the former IFA’s £50K trail.

Networks failed to did not lobby against RDR mainly because they saw this as a good swap! £15K for £50K, especially when the practice buyout of a Network is based on trail fees and many poor quality product providers are looking to buy Networks in order to benefit from restricted advice i.e. post RDR “restricted advice”, where they can peddle substandard products via advisers without choice?

@Anitaki

Your nautical metaphor sort of works, however I thought a lighthouse is situated on the rocks you intend to steer clear of!

Let us hope that 'one of the greatest advocates of RDR' provides a shining beacon in her new position, illuminating the gloom surrounding RDR, and providing a brilliant waypoint enableing them to navigate towards the promised haven of profitability.

Or not, we will see!

@Simon Mansell

Sounds like the usual network/national mantra - one day we will make money! The problem with most of the donkeys who run these companies is that they have no idea that clients just want good advice and are happy to pay for it. So, they waffle on about initial and trail, whilst wasting their investors money.

Here's a radical idea for someone like Lighthouse - provide a consistently good service, and persuade customers to pay for it.

It would not surprise if the first few months of 2013 are poor too because of the impact of RDR. It is what happens afterwards that matters.

What are the benefits of being a member of a network? There are networks which offer compliance services, newsletters, guidance etc. You can then go directly regulated. I have used 3 different suppliers in my career and am now with SIFA and very happy. That would be my choice.