28 Jan 2015

Making the move from Bank Adviser to IFA

Towards the end of 2014 the Lloyds Banking Group announced that they were withdrawing from the Protection market,  which probably left a number advisers wondering what their next steps could be.

This week’s blog concentrates on how easy it actually is for a bank adviser to take a step forward to becoming an Independent Financial Adviser (IFA) and what they have to think about when considering this option.

Working within a bank environment

The vast majority of Bank Advisers are currently based within a branch environment and probably have been for a number of years. They get to enjoy a number of benefits that would be unfamiliar to an Independent Financial Adviser (IFA). Some may have worked for the bank in a number of roles, progressing from cashier to customer services to bank adviser.

A Bank Adviser is paid a basic salary, along with additional benefits such as sick-pay, death in service, company pension and possibly even a company car or car allowance. Moving from this environment to being self-employed is a big step to take, but may prove to be the best decision for you with the right support and guidance.

Whilst working within Bank assurance has its advantages, the opportunity to be your own boss can be an attractive option.

There are advantages and disadvantages of being a Bank Adviser:


  • There is the comfort of being branch-based
  • A continual source of customers that are derived from the Bank’s own database
  • Additional leads being provided by the customer service team

On the other hand:

  • The demands of such an environment means that many advisers feel that they are being managed on the basis of business levels and key performance indicators, day in, day out.  Many people in the industry have the opinion that the quality of advice from bank advisers is sacrificed for target-driven sales.

Working as an Independent Financial Adviser (IFA) versus bank adviser

Working as an IFA enables an adviser to manage themselves, choose which customers to see and develop their business in a way that suits their own circumstances and needs.

Bank Advisers are limited in the services they can provide to their customers, as most of them are tied to one product provider.  This means that on occasions, the customers’ needs may not be met fully or they could be more expensive in comparison to what was available in the marketplace. Working as an IFA, the adviser would have access to a greater number of product providers and services, which ensures that the recommendation is right for client.

Whilst working for a Bank would mean that on-going training and support is provided, this would be very much a ‘one size fits all’ approach with little room for manoeuvre to develop in areas that are of specific interest to the adviser.

By working as an IFA, your on-going development is structured around what is important for your own business and relevant to your own needs.

Becoming an Independent Financial Adviser

Making the step of moving from Bank Adviser to IFA, there will be a number of things to consider that would not have been apparent when working for a Bank. Since the introduction of RDR, two years ago, a large number of advisers would have been providing ‘protection-only’ advice to their customers. This means that whilst many are Diploma qualified, few have an up to date ‘Statement of Professional Standing’ and many are still working towards this by way of their 35 hours of ‘Continued Professional Development’.

Being self-employed means that there will be costs that a Bank Adviser will encounter that they have not come across before. Having worked on an employed basis, a bank adviser would have been paid month in, month out with no concerns in relation to tax or any.  As a self-employed adviser, this is an area that needs to be taken in to consideration. Fees for the FCA and Personal Indemnity Insurance that were previously covered by a bank adviser’s employer would potentially become the responsibility of the IFA.

Advisers have essentially two options when they set up: they can set themselves up independently and be directly authorised with the regulator; or they can choose to be an authorised representative of an advisory firm or network, which will handle much of the compliance function.

For those avoiding the direct route, you may wish to look at the option of becoming a member of a network and become an appointed representative.

An appointed representative is a person who conducts regulated activities and acts for an agent for a firm directly authorised by the FCA. The directly authorised firm is known as the AR’s ‘principal’.

There must be a written contact between the principal and the AR documenting the arrangement. The principal takes full responsibility for ensuring that the AR complies with the FCA’s rules. As an AR, you need to understand and comply with the regulatory requirements relating to the business you do.  You must allow the principal access to your premises and records so they can carry out their supervisory responsibilities.

Being part of a secure network not only offers peace of mind, but genuine protection if things go wrong. Networks can assist with complaints management and re-dress; having an external compliance department keeps your business safe.

Conversely, you may wish to be directly authorised. Being directly authorised by the regulator is more than just standing on your own two feet. You report directly to the FCA and are totally responsible for the conduct of your own affairs.

An IFA would need to consider three things before considering going directly authorised:

  • Make sure you have an experienced compliance officer. You can hire expert assistance from service firms but you will need one highly competent person in your firm who lives and breaths compliance.


  • A needs analysis and advice process that is documented. The process you took your client through, the decisions they made and the rationale behind them need to be crystal clear to an external reviewer several years in the future. When it comes to complaints, you will have to prove your innocence; poor documentation has cost hundreds of millions in admin costs and redress over the last decade.


  • Robust professional indemnity insurance from a recognised insurer. For a small firm, this can be difficult to obtain and expensive if you find an insurer that will cover you. You also need to secure run-off cover if you ever leave a network – ensuring that the business you have written in the past is still insured.


Choosing to go directly regulated is a significant decision and requires careful thought and planning. In today’s regulatory environment direct regulation should never be seen as the ‘easy option’. There will be added responsibilities and potential costs for going direct.

Whilst a network will charge you a percentage of your turnover, appointed representatives shelter under the capital of the network and therefore are not subject to the capital adequacy rules. One hurdle for some going directly authorised might be the capital adequacy requirement.

From 2015, firms will be subject to the 13/52 rule. In short, firms will need to keep 13/52 of their annual qualifying costs as regulatory capital. The rules are quite complex and advice should always be sought from your accountants but, for example, a firm with qualifying costs of £500,000 would need to keep £125,000 as regulatory capital.

If you are a bank adviser who is interested in becoming an IFA we can help. Call us on 0800 092 1272 for help and advice about the transition.


By Alessio Ferrero