Choosing between direct authorisation by the FCA and joining a financial adviser network is a pivotal decision for financial advisers establishing or growing their practice. Rebecca Bonner, Director and IFA at Trigpoint Financial Planning, who is directly authorised, and Elliot Smith, Founder and Chartered Financial Adviser at Wealth Spring, who is part of the Sense network, share their perspectives on these two approaches. Their insights highlight key differences, advantages, challenges, and the decision-making processes that define each model.
Key differences
The structural differences between direct authorisation and network membership significantly impact day-to-day operations. For Rebecca Bonner, direct authorisation offers freedom from unnecessary complexity. “A network brings layers of interpretation and extra rules that are not necessary in smaller businesses,” she explains. “This means we can set up processes for our work but change and adapt easily if we find a better way to do things.”
By contrast, Elliot Smith highlights the structured efficiency of network membership: “As a member of an Independent Network, my day-to-day operations are simplified as the network provides a shortlist of providers for support and back-office systems.” This arrangement, he notes, reduces the time spent on compliance and administration, allowing him to focus more effectively on his clients.
Biggest advantages
Direct authorisation grants advisers the autonomy to operate independently. Rebecca values this independence, saying, “Being able to make decisions quickly and having flexibility in solutions is critical. Having control over the outcomes enables me to deliver advice entirely in the client’s best interests without external constraints.”
Elliot acknowledges the appeal of independence but values the balance provided by a network. “It gives me more time and energy to focus on clients to help them live the lives they want,” he says. The network’s structure, he believes, allows him to deliver personalised financial planning while benefiting from operational efficiencies.
Compliance management
Compliance is a universal challenge for financial advisers, but the approach differs significantly between models. Rebecca, who operates under direct authorisation, relies on a compliance consultant to simplify FCA regulations. “She translates the FCA world into plain English,” Rebecca shares. “Understanding the risks makes for better advice. Minimising the risk of a bad outcome has to be a good thing.”
Elliot, working within a network, appreciates how compliance responsibilities are shared. “The network provides monthly compliance bulletins which are concise and digestible,” he explains. “This means I can focus on spending time with clients and helping them towards their goals.”
Financial considerations
The financial implications of each model also vary. Rebecca acknowledges that direct authorisation can initially be more expensive but explains, “In the early days, it was more expensive to be directly authorised as opposed to paying a percentage of income, but as the business grows, that shifts.” She also notes that capital adequacy can be a barrier for some.
Elliot highlights the affordability of the network model for new advisers. “The network model involves far less in terms of start-up costs,” he says, adding that network-negotiated terms with technology providers “bring down the overall cost of doing business considerably.”
Operational and technological support
Operating independently requires resourcefulness. Rebecca leverages a professional network for collaboration: “I share ideas with other business owners and constantly sense-check how we do things to discover ways to improve.”
Elliot finds value in the systems provided by his network. “The network offers a range of technology providers and mandates the use of a single back-office system,” he says. While this approach simplifies operations, he notes that “the mandated systems could be improved.”
Product offerings and flexibility
Both Rebecca and Elliot find that flexibility in product offerings depends on the specific network. Rebecca observes, “Some networks allow advisers a full range of products and services, so there is often no difference at all.”
Elliot similarly reports that his network supports a fully independent model. “I am not restricted in terms of products or investments,” he says, enabling him to meet diverse client needs without compromise.
Adapting to industry changes
Rebecca sees direct authorisation as offering greater agility. “My compliance consultant makes her clients aware of changes, and we can discuss how we are affected and adapt quickly,” she says, contrasting this tailored approach with blanket rules.
Elliot values the network’s structured response to regulatory change. “The network may be hypothetically slower, but it ensures structured actions”, he states, adding that this allows him to stay compliant without consuming his firm’s resources.
Decision-making processes and pathways
Rebecca’s decision to pursue direct authorisation stemmed from her desire for control. “I wanted to be in control and not subject to someone else’s change of direction ,” she explains. While she found the process thorough, she acknowledges that it has become more complex and time-consuming in recent years.
For Elliot, the time and resource demands of direct authorisation made joining a network the logical choice. “The timeframe of 12 months or more to become directly authorised drove me towards joining a network,” he recalls. He found the onboarding process straightforward, involving interviews, training, and a robust induction programme.
Client trust and perception
Both advisers report minimal impact on client trust based on their choice of model. Rebecca shares, “It’s not something a client has ever commented on or questioned. They want to know they like and trust you and that you will do your best for them.” Elliot echoes this, noting that he addresses misconceptions by explaining his business decisions and demonstrating how they benefit clients.
Future trends
Looking ahead, both Elliot and Rebecca see significant trends and challenges shaping the future of financial advice, each with implications for direct authorisation and network membership.
Rebecca sees networks as a valuable stepping stone for advisers entering the industry, stating, “Networks allow people a great route to being self-employed and running a business with a safety net.” However, she points out limitations for those aiming for direct authorisation, suggesting the need for “‘incubator’ networks where people could go to with a view to being directly authorised.” Rebecca also notes that while the FCA seems to encourage networks as a pathway, “not all networks are supportive of people moving on,” which can create added barriers for advisers pursuing independence.
Elliot observes a critical shift in FCA oversight: “We may be at a crossroads with the FCA, as they take a more data-led and proactive approach.” He highlights concerns about poor oversight within some networks, noting, “Poorly run networks are in for a difficult time.” However, he believes well-managed networks are well-positioned to thrive: “Well-run networks like Sense are best placed to manage regulatory change, and I’ve seen that in the responsiveness and efficiency of the network’s compliance updates.” Ultimately, Elliot concludes that “both directly authorised and networks are necessary” to meet the diverse needs of the sector.
Conclusion
The choice between direct authorisation and network membership ultimately depends on an adviser’s priorities and resources. Direct authorisation offers control, flexibility, and independence, while networks provide structured support and efficiency. Both models have their merits, and the right choice comes down to personal goals and circumstances.
