Your Industry  

Should you be directly authorised?

This is investment that an AR firm clearly would not attract, Ryder adds. But the decision to become directly authorised is not made lightly.

“We’d suggest talking to other advisers to find out the pros and cons of any course of action,” says Ardron. “Most service companies would welcome potential members to their events, so that they can both sample the quality of support available, but also engage with other advisers and ask about the things which matter most to them personally.

“Additionally, talk to the businesses from which you want to access support in the future. Any reputable company will welcome all the questions you have to help you feel assured that you are making the right choice.”

Absolute Sense, a financial planning business in Cambridgeshire, is one firm that has made the switch from appointed representative to direct authorisation.

“We felt that as a chartered firm with five advisers, a mortgage specialist and a superb support staff, we were capable of working directly with the FCA and other stakeholders and there would be a potential cost saving by cutting out a layer of ‘management’,” says director and chartered financial planner, Paul Waggitt. 

“We wanted to make our own decisions on the direction of the business, and we have achieved this by growing the business and attracting quality advisers looking for an independent home.”

Waggitt also says there has been some cost saving, which has been directed towards growing the business and supporting its staff and advisers. “It should also be noted that the hidden cost of time spent liaising and reporting to the network has been a significant saving,” he adds.

Becoming directly authorised

For firms that are considering the same move, there are potential bumps on the road to direct authorisation.

Martin at Threesixty warns that businesses will need to take note of any obligations to their network or principal firm.

“Are there any contractual restrictions because of their existing role that would restrict their ability to service existing clients? Are they required to maintain run-off professional indemnity cover post-termination, and if so, for how long?” he asks.

Another common issue that Threesixty encounters is networks effectively freezing income for a period when notice is given, Martin says.

“It’s vital to understand the terms of an existing AR agreement before a firm makes the decision to apply for direct authorisation to avoid any nasty surprises,” he adds.

Paradigm Consulting’s Ryder says stories of various hoops that companies have needed to jump through to change to direct authorisation are “numerous”. In addition to frozen payments, he cites “onerous” advice checks and contractual terms being applied “to the letter”.