Brokers that want to leave networks often find the process much harder than they expected, according to One77 Mortgages managing director Alastair McKee.
Here are his top tips for brokers wanting to start to process of moving from being appointed representatives to directly authorised firms.
1. When you apply for your new FCA authorisations, think about whether you should do it ‘under the table’ and set up a new firm to get around the onerous ‘freezing’ of pipeline commission, or apply with your current company name. I’d favour the latter if you have a brand name and an established firm.
2. It will take between three and six months to get authorised by the FCA, so build this into your timeline. Make sure the FCA don’t ask for a reference from the network until you say so, as you don’t want to tip the network off prior. I’d also recommend getting some help from a professional with the FCA form to make sure you get it right first time.
3. Once the FCA have provided you with intent to authorise, you can then formally write to the network to resign. Most networks ask for three months notice, so build this in. You’ll also potentially be hit with a fairly substantial bill for FCA fees depending on how your current network bills for these, i.e in advance or in arrears. You should also make sure you know what time of year is the best time to resign, as lots of networks charge fees based on a whole year. So if your network’s year end is August, then resign in May. Then you only pay for what you use and not a full year’s fees, like you would if you resigned in September in this instance.
4. Then it’s a case of getting all your compliance issues in place in the three months that you have to work the notice out.
5. Everyone thinks networks freeze your pipeline the day you hand in your notice. Most don’t, and only freeze it on the day you leave until you novate the clawback liability for protection sales away from the network to yourself. The more organised you are with this the quicker it can be done, so budget for six to eight weeks if you are organised.
6. You’ll need to provide your client database to the network to comply with their rules for case checks and future complaints liabilities. Make sure you are clear with the network of what format they want this in.
7. This is where the relationship can sour quickly. The network will have all your pipeline business but don’t see you as a customer anymore, and therefore communication can become a one-way street. Be prepared to chase the network to get your outcomes.
8. It goes without saying that before you start all of this, make sure you have access to funds to cover the lack of income for two to three months until the network releases the pipeline. Failure to plan will cripple your business from a cashflow perspective, so get it right and have funds available.
Get the champagne out and enjoy your new DA status.