ValidPath launches funding solution to remove financial barrier for ARs leaving legacy networks

by | Feb 20, 2024

Share this article

  • Up to £100,000 loan facility available on favourable terms
  • Supports the cash requirements of a firm during transition period
  • Another example of ValidPath seeking to support independent advisers

ValidPath, the network for independent financial advisers, has launched a new funding solution to support established firms wanting to leave their current network, but feel shackled by exit terms that would have a negative impact on their business cash flow such as financial penalties, PII run-off or withholding income.

The funding solution has been developed for appointed representatives (ARs) transitioning to ValidPath and that have established businesses with recurring revenue and client policies that will need to be novated.  The funding solution provides qualifying ARs access to a facility up to £100,000 to support working capital purposes or exit fees as part of a deauthorisation ‘notice period’ and the FCA authorisation process with ValidPath.

Temporary security is required while the facility is outstanding, however, terms include an initial non-payment interest-only period followed by amortisation period.  Repayments are made collectively over 24 months with all payments made from future revenues.  The facility therefore maximises the cash available for the business during its transition period and supports the firm’s cash flow by aligning the repayment schedule to its future revenue. 


As the industry increasingly moves towards consolidation, vertical integration and restricted advice, and with margin expansion and cost pressures often conflicting with consumer duty and what is best for clients, the concept of golden handcuffs is commonplace in the market and exit penalties is one method used by incumbents to maintain the status quo. There are countless examples of ARs being leveraged by their network to support a commercial outcome not necessarily in their best interest, for example, with recent network closures where ARs would be penalised for not transitioning to the preferred acquirer.

This new funding solution aims to solve another challenge for firms by making it easier for them to run their business their way and with the partners they choose and be able to support authentic independent financial advice.

Angus MacNee, CEO of ValidPath said: “An IFA proposition should compete on its merits and not via a punitive lock-in that prevents you leaving to protect an outdated business model and self interest.  In the consumer space generally, this is understood and the marketplace has adapted accordingly, yet in the retail wealth space, preserving the status quo via financial penalties and barriers remains prevalent.


“While I appreciate that some exit fees are necessary, for example to cover potential liabilities via PII, for which withholding commission can sometimes be the mechanism to achieve this, often such fees can adversely impact the firm and its ability to plan accordingly. When we have seen some of the key issues in the sector, we have consistently sought to solve them for our ValidPath proposition and IFA members.  This could be technology via our proprietary systems, PII via our captive insurance company, IFA exit and succession planning via our succession solution as an alternative to consolidation, and now with this facility. 

“At its core, this new funding solution has been developed to provide a safety blanket for ARs and enable them to choose a network based on what suits their business requirements and future needs, not their financial situation or current circumstances.  And increasingly this is ValidPath, and this initiative reflects our commitment to continually seek to improve our value proposition for advisers over time.”

Richard Phillips, Network Development Director of ValidPath said: “Firms have called our financial facility a game changer. Some don’t intend to draw funds, however, they view it as a safety net and it gives them confidence that it is in place.  For others, it can be the catalyst that will enable them to accelerate their business planning and move their firm to ValidPath and our independent proposition.  For some larger firms, it is a necessity to cover business expenses and avoid disruption for their advisers.  At its core, this new funding solution aims to solve another challenge for firms by making it easier to say goodbye to legacy networks and hello to a modern and independent network like ValidPath.”


Share this article

Related articles

Sign up to the IFA Magazine Newsletter

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, that fits perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode