The Intermediary – April 2025 - Flipbook - Page 65
B RO K E R B U S I N E S S
Opinion
Increasing the
attractiveness of
the AR model
I
t’s a decision that every
mortgage broking
entrepreneur must make at
some point: whether to gain
regulatory permissions via the
appointed representative (AR)
or directly authorised (DA) route.
There is no wrong answer, and the
route you take ultimately rests on how
you want to operate as a firm.
That said, with the Financial
Conduct Authority (FCA) looking to
increase its supervision of mortgage
brokers over the next two years, it is
extremely likely that the AR model
will become more aractive.
The regulator’s recent ‘Dear CEO’
leer outlines its plans to scrutinise
advice quality, high-pressure selling,
fees and fair value and financial
promotions over the next two years.
Quite right, of course.
Quality of advice
The regulator is placing renewed
emphasis on ensuring that brokers
deliver tailored, high-quality advice
rather than simply ticking boxes to
meet lender criteria. Advisers must
prove they recommend products that
truly suit their clients’ needs.
Networks are well-equipped to
meet this challenge through robust
training and business standards
control measures. Many networks also
offer centralised training programmes
designed to keep advisers updated on
the latest regulatory expectations and
industry best practices.
In addition, many provide
guidance on how to conduct thorough
suitability assessments and construct
advice journeys that clearly serve the
client’s best interests. Not to mention
dedicated tech solutions which support
the optimal advice journey.
Regular internal audits and peer
reviews further reinforce these
practices by ensuring that advice
is consistently aligned with FCA
guidelines. This integrated support
structure minimises the risk of
recommending unsuitable products
and helps firms maintain high
standards in client service.
High pressure selling
The FCA also plans to investigate highpressure selling tactics, particularly
in relation to sales incentives that may
drive misselling or product bias.
The risk, as the regulator sees it,
is that such practices could prioritise
commissions over client needs,
leading to a culture where aggressive
selling overshadows best advice.
Networks handle these risks via clear,
ethical guidelines and processes. For
example, Stonebridge has rigorous
standards that focus on consumer
outcomes, and which seek to prevent
high-pressure tactics.
This approach is supported by
investment in advanced technology,
which continuously monitors advice
processes to detect and eliminate any
conflicts of interest.
By ensuring that a broker’s practices
remain ethical and client-focused,
networks help advisers build trust and
credibility with their clients, while
staying on the right side of regulatory
requirements.
Fair value
Another critical pillar of the FCA’s
strategy is ensuring that the fees
charged by advisers represent fair
value, as per the Consumer Duty.
While it isn’t the role of a network
to dictate fee levels, good networks
offer essential guidance that helps
member firms develop transparent
pricing models that are fair value. By
sharing market insights and industry
benchmarks, networks enable
ROB CLIFFORD
is chief executive
at Stonebridge
advisers to set fees that are both fair
and reflective of the service provided.
Financial promotions
Producing balanced, accurate and
regulatory-compliant marketing
materials can be complex and timeconsuming for many advisers. This is
another area where networks can offer
support and guidance.
Many networks streamline this
process by offering access to proven,
off-the-shelf templates and detailed
guidelines that align with regulation.
Some networks also conduct regular
reviews of promotional content,
ensuring that any marketing material
remains effective yet compliant.
This proactive approach helps
advisers avoid costly regulatory
pitfalls, while freeing up advisers to
focus on what they do best – delivering
quality advice to their clients.
Appeal of AR
As Joanna Legg, head of consumer
policy and outcomes at the FCA, noted
at Stonebridge’s annual conference
recently, the AR regime “offers a
proportionate and cost-effective way to
comply with regulations” and gives a
more accessible route to market.
That’s always been the case.
But with the FCA enhancing its
supervision of the sector, we believe
more brokers will come to value those
benefits as well as the safety net that
networks provide.
In an evolving market where
compliance requirements are
continuously tightening, the AR
model offers a proven path to
achieving both regulatory compliance
and sustainable business growth. ●
April 2025 | The Intermediary
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