Appointed Representative
What is an Appointed Representative?
An Appointed Representative (AR) is a business that carries out regulated activities under the responsibility of anr FCA-authorised firm, known as the principal. The principal firm holds the regulatory permissions and is responsible for overseeing the AR’s regulated activities and ensuring it complies with FCA requirements.
For many start-up brokers, becoming an AR can provide a faster route to market than seeking Direct Authorisation. Rather than applying for your own FCA permissions, you operate under your principal’s regulatory umbrella, benefiting from its permissions, oversight and support.
Is the Appointed Representative route right for you?
For brokers looking to launch quickly or who would value regulatory support during the early stages of growth, the AR model can be an attractive option. However, it is important to understand that while some regulatory responsibilities sit with the principal, the AR is still expected to meet the standards and requirements set by the principal firm and the FCA.
Whilst the principal firm is responsible for submitting the appointment application and overseeing regulated activities, prospective ARs should still expect to demonstrate a strong understanding of how their business will operate. This includes areas such as governance, Consumer Duty, customer journeys, complaints handling, compliance arrangements, staff training and operational processes. Principals will typically assess these areas as part of their due diligence before agreeing to an appointment.
Advantages
- Faster route to market Begin trading under your principal firm's regulatory permissions without going through the full Direct Authorisation process.
- Reduced regulatory burden Benefit from compliance oversight, expertise and support provided by the principal firm.
- No client money responsibilities Client money arrangements and associated regulatory requirements are typically managed by the principal.
- Access to insurer markets Gain access to established insurer panels, products and facilities without needing to negotiate individual agency agreements.
- Business support and infrastructure Many principals provide access to technology platforms, training, marketing support and operational guidance.
- Valuable industry experience Develop experience running a brokerage before considering Direct Authorisation in the future.
- Focus on growing the business Spend more time acquiring and servicing customers rather than building regulatory and operational frameworks from scratch.
Considerations
- Less independence You will operate under the oversight and control of your principal firm.
- Restrictions may apply The principal may limit the insurers, products or activities you can undertake.
- Ongoing monitoring and oversight Regular reporting, audits and due diligence reviews are likely to form part of the relationship.
- Alignment with the principal's framework You will be expected to follow the principal's policies, procedures, systems and compliance requirements.
- Costs and contractual commitments There are typically fees associated with the arrangement, and it's important to understand the services being provided and any contractual obligations before proceeding.
Finding a principal
The first step on the AR journey is identifying a principal firm that is willing and able to sponsor your business.
Your principal must hold the regulatory permissions required for the activities you intend to undertake and be satisfied that your business is suitable to operate as an Appointed Representative.
Before agreeing to an appointment, principals will typically carry out extensive due diligence, including reviewing:
- Your business model and intended activities.
- The experience and suitability of directors and senior leaders.
- Financial stability and funding arrangements.
- Governance and compliance arrangements.
- Any existing or previous regulatory history.
In many respects, principals will want to understand the same information that would be required for a Direct Authorisation application. They will expect you to explain your business model, target customers, governance arrangements, customer journey, approach to Consumer Duty and how the business will be managed on a day-to-day basis. Being well prepared in these areas can help make the onboarding process smoother and improve the likelihood of securing a suitable principal.
What good looks like
The strongest AR applications demonstrate that the business has a clear proposition, experienced leadership and a good understanding of its regulatory responsibilities, even though it is operating under a principal’s permissions.
Principals are increasingly selective when onboarding ARs and will want confidence that the relationship is sustainable and aligned to their own risk appetite.
The appointment process
Once a principal has agreed to support the business, a formal agreement must be put in place setting out the regulated activities the AR can undertake. The principal is then responsible for notifying the FCA and providing information about the proposed appointment.
The FCA advises that AR appointments can take longer than 30 days, with some taking up to 90 days where further assessment is required.
Your principal will guide you through its onboarding process and explain any information, documentation or approvals required before trading can begin.
Budgeting for the AR route
Whilst becoming an AR typically involves lower upfront regulatory costs than Direct Authorisation, there are still important financial considerations.
Depending on the principal and the support provided, costs may include:
- Principal firm fees.
- Revenue share arrangements.
- Technology and platform access.
- Compliance and oversight charges.
- Professional advice and business support.
- Staff and operational expenses.
The principal firm is responsible for submitting the AR application to the FCA, meaning ARs do not incur the same FCA authorisation application costs as directly authorised firms. However, there is no standard fee for becoming an AR. Commercial arrangements vary considerably between principals, with some absorbing certain regulatory and onboarding costs as part of their business model, while others recover costs through fees, revenue share arrangements or ongoing service charges.
Before proceeding, firms should ensure they fully understand the commercial arrangements, ongoing fees and contractual commitments associated with the relationship, as well as the level of support and services being provided.
When comparing routes, consider both the upfront costs and the longer-term financial implications. Whilst the AR route may reduce initial expenditure, the most suitable option will depend on your business model, growth ambitions and desired level of independence.
Could you become directly authorised later?
Yes. Many brokers begin as an Appointed Representative before moving to Direct Authorisation as the business grows.
The FCA has highlighted situations where direct authorisation may become more appropriate, including where the AR has become significantly larger, where conflicts arise within the arrangement, or where the business model no longer aligns with the principal’s strategy.
Preparing for principal due diligence
Although your principal firm will submit the appointment application to the FCA, you should still be prepared to discuss many of the same topics explored within a Direct Authorisation application.
Before agreeing to appoint an Appointed Representative, a principal firm will typically carry out detailed due diligence on both the business and the individuals behind it. The principal will want confidence that your business model is viable, your leadership team has the appropriate experience and your proposed activities align with its regulatory permissions and risk appetite.
While ARs do not usually need to submit their own Regulatory Business Plan to the FCA, many principals will expect to see information covering similar areas, including your business model, governance arrangements, customer proposition, financial resources and growth plans.
The next sections of this hub have been developed primarily to support firms pursuing Direct Authorisation and completing an FCA Regulatory Business Plan. However, much of the guidance remains highly relevant to Appointed Representatives and can help you prepare for discussions with potential principals, respond to due diligence requests and demonstrate that your business is ready to operate successfully.
Explore our application guidance
What's next?
Receiving FCA authorisation is a significant milestone, but it’s only the start of building a successful brokerage.
Once authorised, your focus shifts from obtaining regulatory approval to getting your business ready to trade, securing insurer and market access, implementing systems and technology, attracting and retaining customers, and creating the operational foundations needed for long-term growth.
Explore the next stage of the journey in our Getting Ready to Trade section, where you’ll find practical guidance on turning your business plan into a successful and scalable brokerage.
**The information in this Hub is of a general nature, for guidance only and is not intended to address the circumstances of any particular individual or entity. We do not guarantee or verify the accuracy, completeness or suitability of the content. To the fullest extent permitted by law, BIBA and Intact Insurance cannot accept any responsibility for any loss occasioned to any person or entity arising from reliance on the information in this Hub. Read our website terms of use >https://www.biba.org.uk/terms-conditions/.
