The decision of opting for direct authorisation or via a network particularly for smaller firms or start-ups needs suitable consideration. Either way the choice should not be solely made on perceived initial or short-term reduced costings.
As Panoramic Wealth Management we considered the position based on the many factors that direct authorisation as our own independent firm was the most suitable.
We made our decision amid a period of IFA consolidation, which in many cases resulted in a move to a vertically integrated model, or, in some instances, to a restricted model.
Our decision was also made by taking into account industry history. Following the demise of some networks, many advisers had already chosen to be directly authorised. Nowadays there is less of a mystique about direct authorisation.
Where applications are professionally presented, the FCA is more geared up to deal with applications in reasonable timescales along with providing interaction during the process, which we found to be the case.
Our concern relates to potential external commercial issues affecting a network which would be completely out of our control. Not only could there possibly be an issue over our own cashflow but also downtime if waiting for re-authorisation, both of which have occurred in the past. We preferred to be master of our own destiny.
With networks, the position of client ownership will depend upon on what contract you are willing to sign or what is actually offered. We looked to maintain control and ownership of our clients which we felt was better suited with direct authorisation.
Where conceivable, we wanted to be able to control cost. There is a possibility with networks, because of their infrastructure, that fees increase due to their own circumstances rather than your own or market conditions.
In addition their corporate decisions may not be aligned with your own.
Where conceivable, we wanted to be able to control costWithin their framework they need a regime to accommodate advisers of all ability levels. For very experienced and highly qualified advisers such as those who are either chartered, certified or both, may feel restricted.
When choosing direct authorisation the intention should be to operate the firm with the mindset that it is as a smaller version of the larger firms and to ensure that the firm is able to implement that style of infrastructure. If this is not possible or not desired then closer consideration of the network needs to be given.
We had an established business base that we felt allowed us to re- launch as Panoramic with the style of offering we wanted to take to market and decided that was suited with direct authorisation.
Gary Jefferies is a chartered financial planner of Panoramic Wealth, based in Kent
