How To Become An Appointed Representative or AR

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As an appointed representative, you are essentially 'appointed' by a company that has a full credit license and can carry out broker activity for financial products including loans, insurance and credit cards.

You may want to be an appointed representative if you are running a brokerage service in the form of an online comparison or lead generation website. Acting as an AR means that you can be up and running much quicker and also test the waters before deciding to acquire your own license.

What Are The Benefits Of Being An AR?

There are a number of benefits to becoming an appointed representative, based mainly on lower costs and barriers to entry.

  • The FCA authorisation process can be lengthy and typically take 12 to 18 months to be approved. You will need to provide structured business plans, procedures and present the capability of the key persons. Authorisation can be approved in less time i.e. a few weeks, with the help of an agency that specialises in FCA compliance.
  • An appointed representative it is less expensive to apply and run than being direct authorised. The costs are incurred against the principal agent who may charge you a licensing fee or percentage of profits.
  • The principal also has the possibility to spread the compliance costs across a number of appointed representative clients, saving you on startup and running costs.
  • Since you do not hold data, you do not have to worry about how the data is kept and held

What Are The Disadvantages Of Being An AR?

Whilst there are a number of positives when it comes to having appointed representative status, there are caveats too which you will need to be aware of, such as:

  • Whilst an appointed representative can provide investment advice it does not have the authority to management investments.
  • It is isn’t possible as an appointed representative to store data, and you will need to give the principal access to its confidential records, premises and staff so that in this role you are effectively supervised.
  • Without being able to capture data, you cannot remarket to customers by email or potentially sell a list of customer records when selling the site.
  • Whilst not directly regulated by the Financial Conduct Authority, you will still have to abide by the majority of their rulings.
  • An appointed representative cannot receive payments or invoices directly, these would need to go through the principal company and then paid to you, which can delay payments and impact your cash flow.

What Are The Responsibilities Of An AR?

  • The principal company has to accept full responsibility for the appointed representative firm in the event that liabilities arise. The AR and their activity must be FCA compliant and could be prosecuted for things including lack of transparency, poor wording, poor selling of data and any advice they provide to clients
  • The principal firm also has to make sure that the appointed representative delivers upon the 6 ‘treating customers fairly’ outcomes that are stated by the FCA. These relate to the fair treatment of customers when it comes to the product and services offered by a business.
  • One of the fundamental responsibilities as an appointed representative including compiling and fully understanding the regulatory requirements that are relevant to the business they are carrying for the principal
  • That the appointed representative has the appropriate approved person or group of people when this is necessary.
  • Allowing the principal firm full access to premises, data and records

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