Becoming Directly Authorised

By - Jennifer
09.11.21 01:37 PM

The question of whether to become directly authorised (DA) or not remains a common one. And yet despite this, it’s still not easy to answer. As equally right as it is for some firms to remain part of a network, for others, becoming DA is the natural next step.


However, if you are considering becoming DA, it is vital that you do so with your eyes open regarding what you need to do and keep doing. What follows is a brief breakdown of some of the biggest and lesser-known hurdles and issues you will need to consider. 


Putting You in the Driving Seat


For many, the biggest reason to become DA is the greater control it provides. Whilst some networks give you complete freedom, many do not, resulting in the search for greater control. Becoming directly authorised provides this, enabling you to develop your own business model and systems and therefore operate exactly the way you want. Some of the biggest freedoms you get from becoming DA include:

  • Only selling the products/services you know are best for your clients
  • Designing your own research processes & suitability reports
  •  Creating your own competency criteria, adviser assessments and T&C scheme
  •  Choosing your own compliance support partner & resources


Whilst becoming DA really does put you in the driving seat in terms of running your own business, gaining greater control also brings with it added responsibilities.


The Challenges of Going DA


Simply put, being directly authorised means you are directly responsible for your actions. Not only must you fully understand your regulatory responsibilities, but more importantly, be able to continually demonstrate your ability to fulfil them. If you don’t, you run the risk of fines, reputational damage, and loss of earnings. Some of the biggest issues for newly authorised firms include:

    • Keeping up to date – Staying abreast of FCA communications, rules and requirements, and interpreting these into your policies & procedures
    • Reporting data to the FCA – Including details of your systems, business continuity and emergency recovery procedures, as well as the twice yearly RMAR report for MiFID exempt firms
    • Protecting your clients – Having an appropriate complaints procedure and process & ensuring clients are not disadvantaged due to poor service, systems, controls, advice or attitude to risk


More Control = More Work


Becoming DA involves many changes, with some of the lesser thought about issues including the need to create a training & competence scheme for advisers relevant to your level of business model expertise. You will also be required to design your own research and investment processes, as well as suitability reports and client review criteria & standards. Finally, and often overlooked, is the need to constantly monitor and assess your own advisers and practices, as well as having a quality recruitment process in place.

The Cost of Becoming Directly Authorised

Once you become DA, you will no longer be paying network fees. Furthermore, compliance support is often cheaper, as will likely be PII payments. However, doing this to simply to save money is not recommended as you must consider the longer-term price of becoming directly authorised, including the cost of additional staff and external compliance services. And then of course is the significant amount of extra time you will be spending on your firm. Direct authorisation works best for firms confident in their ability to meet their regulatory requirements and with an already strong grasp of their own operations and systems.

The Long & Winding Road

And finally, the reality of the directly authorised application process is that it is neither simple nor quick. Requiring a significant amount of detail and preparation, it can take anywhere between 2 to 8-weeks to complete the online application depending on whether you get professional help or not. Once that is done, and if everything is perfect with your application, you still likely have a 3 to 6-month wait whilst the FCA reviews it. However, if there are problems with your application or you are required to provide additional information, this can easily rise to 12-months. It is therefore vital that you do everything you can to make your application right first time.

The thought of reshaping your entire business structure can be daunting, especially if you have become used to the support of a network. If you are considering going down this route, get in touch and we will be happy to answer any questions you have. Email joinus@tenet.co.uk or call 0113 239 0011 (option 2). 

Jennifer