Top Gear

How Direct Authorisation can put your business in the fast lane

Top Gear

19 Jul 2019

David Ryder

Autonomy. Freedom. Control.  Ownership.  These four words crop up a lot when we talk to clients about the merits of steering their business onto the open road of direct authorisation. 

Direct Authorisation (DA) vs Appointed Representation (AR)

Over the years, Paradigm Consulting has provided support and guidance to firms operating in both models and in that time we have spoken at length with financial practice owners and Principals on various regulatory and non-regulatory business matters.  It is apparent from these conversations that roadblocks and diversions can be a recurring issue in the AR world, whereas Direct Authorisation usually provides a much more free flowing route to success.  
Now that the FCA have a firmly embedded DA online application process, the road has now become even more clear.  Contact Centre resource has been increased to assist with FCA queries and the online application system now makes it “more intuitive and easier” for businesses to prepare and submit their FCA applications.

To explore whether you’re DA or AR, ask yourself ‘what sort of driver are you’?

The Safety-Conscious Volvo driver

Hands up if you’ve watched the Dudley Moore film, ‘Crazy People’? In this ‘mad cap’ comedy, Moore plays an advertising executive who experiences a nervous breakdown. Consequently, he devises some astonishingly ‘honest’ advertisements, one of which is “Buy Volvos – They’re boxy but they’re good”!
We all know that Volvo is regarded highly for its safety ratings above its other features.  Similarly, AR status is very often ‘sold’ on the basis that it comes with certain protection features, namely capital adequacy, professional indemnity insurance and compliance.
A Network assumes responsibility for these areas, so the adviser business doesn’t need to be concerned about having adequate financial resource on its balance sheet, applying for PI or putting in place a compliance framework.  So long as a firm trades solvently and drives in a straight line on the track laid out by the Network’s compliance function, then all is well. Consequently, some of you may be reading this and thinking “Perfect. That’s just for me!”.

The Exhilarated Mercedes driver

Mercedes have over 40 different models to choose from, ranging from compact Smart cars, progressing to the family orientated saloon, through to the incredibly sleek and sporty GT range. Each is beautifully designed and offers a variety of tangible driving experiences.  So, if this excitement for the open road excites you, then you’re going to love the freedom of DA.
Consider the range of DA financial services practices thriving in the UK right now.  Such a wide scope to choose from, yet they all share the same common traits; autonomy, freedom, control and ownership.  Every individual business is the master of its own destiny, delivering their own vision for their business in a way which suits them.

Benefits of choosing DA

We have numerous first-hand experiences of talking to clients who have successfully transferred to DA and they tell us that it all boils down to the freedom from external control and influence. Systems, controls and procedures specifically designed to be welded to their firm’s own unique business model.

A DA business benefits from receiving all the income it generates which, if it chooses to, can be ploughed back into the business to expediate innovation, development and growth at a faster speed than an AR firm which pays a percentage of its income to the Network.

Of course, as a DA firm is less ‘boxy’, it means that it must implement its own safety features. Capital Adequacy, PI insurance and a compliant regulatory framework all need to be packed into the boot before the journey can begin, but paying for high quality regulatory consultancy support is almost always more cost efficient than the level of fees paid to a Network for much less flexible support.  Think of it as paying for breakdown cover, with your regulatory ‘mechanic’ able to apply their skills to your business ‘vehicle’ on a bespoke basis.

Make Sat Nav and Driverless Support as standard

The road to FCA authorisation can appear daunting and complicated but a great regulatory consultancy can act as your Sat Nav and direct you through the potential speed bumps and offering ‘driverless’ support where they will make the transition a smooth one by actioning much of the work for you.

Volvo or Mercedes? AR or DA?

So, much like buying a car, moving to a DA model is not a decision to be taken lightly. For some, a Network environment will provide the right, steady environment for their business. For those business owners who yearn for a journey where you set your own route, experience tells us that switching lanes to DA can put more horse power under your bonnet and accelerate your business into ‘Top Gear’.
If you would like to know more about how Paradigm Consulting can help you to protect, promote and deliver the vision for your business, please contact us. We would be delighted to hear from you.