When working as an individual or as part of a firm where you are tasked with arranging mortgage policies and protection cover on behalf of a customer, it is imperative that you carry out what is known in the industry as ‘regulated activity’. This regulated activity refers to a way of doing business that abides by the strict guidelines and permissions outlined by the Financial Conduct Authority (FCA). When an individual or a firm operates as “directly authorised”, they assume complete liability for implementing measures to ensure that they are compliant with the FCA guidelines. Firms who do not want to undertake this level of responsibility instead opt to become an “appointed representative” which allows you to enter into a contractual agreement with a network, who is then responsible for making sure the appointed representative is compliant with any and all FCA regulations.
While this explanation will provide interested advisers with an idea of what an appointed representative, or AR, is there is still plenty to understand on the subject that can influence a firm’s decision to operate this way. This is what we will explore in this article, discussing topics such as the benefits of becoming an AR, as well as what the process of becoming an AR actually entails. This will ensure you have all the facts needed to come to a decision as to whether becoming directly authorised or an appointed representative is right for your firm.
How Do You Become an Appointed Representative?
There are a number of key considerations an adviser must get to grips with before making the decision to become an AR. Not only because the decision itself will have huge implications on how you are able to do business, but also because your network firm will have to carry out their due diligence before accepting any prospective firms. Aspiring appointed representatives will have to do their part in proving to their network that they are ‘fit and proper, financially solvent and competent’, in the words of the Financial Conduct Authority. Documents providing comprehensive information on your operations will have to be provided, including, but not limited to, those regarding your:
- Business plan outlining the nature of your regulated and non-regulated activities
- Firm history and information on whether you have worked with a principal firm in the past
- Services offered to retail clients
- Ownership structure
As stated previously, the process of becoming an AR will require a large volume of documents, but these are the sorts of check-ups and audits you can expect your partnering network to undertake in order to find out more regarding your firm’s core business activities and culture.
What Are the Benefits of Becoming an Appointed Representative?
The decision to operate as an appointed representative is one that represents significant change for a firm or individual, and so shouldn’t be taken lightly. With the number of benefits associated with becoming an AR it’s easy to see why such a major change is deemed worthwhile for many.
The major advantage of becoming an appointed representative is undoubtedly the fact that you will no longer be directly liable for reporting to the FCA, with your firm principal instead assuming this responsibility. While a customer-facing individual will still be required to register with the FCA, it is your network who will be tasked with making sure you (the AR) are compliant with any regulations and updates. Advisers and firms who want the peace of mind that they will not be subject to severe punishment if they infringe on any of these guidelines due to the liability instead residing with the principal. The benefits don’t end there however, with just some of the added bonuses including:
- Lower costs – On the whole, being an appointed representative is less expensive than being directly authorised with both the application and management process being more cost-effective with ARs.
- Shorter approval period – Again when compared with directly authorised (DA) firms, the process of actually getting approved as an AR is much shorter, typically only taking a few weeks. This is because the actual FCA authorisation process isn’t undertaken by the appointed representative as it is with the directly authorised firm.
- Access to supporting materials – To really add value to their services, most networks will allow their ARs access to a host of materials and toolkits they have at their disposal, designed to aid them in maintaining relationships with customers via CRM software or sourcing the best policies via their lender panels.
Do Appointed Representatives Have Any FCA Regulatory Responsibility?
While relinquishing sole liability from having to comply with FCA regulatory standards is a major benefit of operating as an AR, it’s not the case that this means you will have zero compliance-related responsibility. While an appointed representative won’t be tasked with reporting directly to the FCA themselves, you will be required to demonstrate clearly that you understand the rules and regulations in place and that you have implemented measures to ensure that you are able to comply with said requirements. As stated previously, a customer-facing individual will also be appointed who will then register with the Financial Conduct Authority and will assume a degree of liability in bridging the gap between you, the AR, and the network you belong to.
Why Join PRIMIS Mortgage Network as an Appointed Representative
At PRIMIS Mortgage Network, providing our ARs with access to forward-thinking compliance training, cutting-edge CRM technology and facilitating mutual success is at the heart of what we do. PRIMIS is also one of the largest mortgage networks, being home to over 1000 AR firms and over 90 different lenders on panel. This panel are available to help you arrange the best policies for your customers at a moment’s notice. If you want to learn more about what makes PRIMIS one of the leading networks for ARs click here, or read our recent article ‘Why Join a Mortgage Network?‘.
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