How to Become a Directly Authorised Mortgage Broker in the UK: Step-by-Step Guide, Costs, and Compliance
Becoming a directly authorised mortgage broker in the UK is a significant milestone for many brokers. While some start their career working under a network, going DA (directly authorised) offers independence and greater financial control. It allows brokers to run their businesses without answering to a third-party network. However, this freedom comes with added responsibilities, particularly in relation to FCA compliance requirements and financial considerations.
In this guide, we’ll cover everything you need to know about becoming a directly authorised mortgage broker, including the application process, associated costs, and compliance requirements. Additionally, for those who want expert support in growing their mortgage business, we’ll provide useful resources for coaching, marketing, and lead generation tailored to mortgage brokers.
What Does It Mean to Be a Directly Authorised Mortgage Broker?
Being directly authorised means establishing a direct relationship with the Financial Conduct Authority (FCA), the regulator for mortgage brokers in the UK. You are no longer reliant on a network for compliance or business operations. Instead, you manage your business and its regulatory requirements independently, which gives you full control over how you operate.
According to Rob Thomas, a directly authorised mortgage broker from Swansea, the biggest advantage is the freedom it provides. "As a directly authorised broker, I set the tone for my business and don’t have to follow network-imposed rules. I decide which lenders I work with, how to structure my processes, and how to grow the business on my own terms."
However, with this freedom comes full accountability. Unlike brokers working under a network, directly authorised brokers must manage all aspects of compliance, financial health, and client relationships themselves. If something goes wrong, it's your firm that answers directly to the FCA.
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Directly Authorised vs. Networks: Key Differences for Mortgage Brokers
Many brokers start their career under a network, which provides access to lender panels, compliance support, and shared responsibility. Networks like Quilter or Stonebridge offer a structure that allows brokers to focus on their day-to-day tasks. However, working within a network can come with limitations and a loss of autonomy.
Rob Thomas, who was previously part of a network, explains: "When you're under a network, they set the rules and control your relationship with the FCA. As a directly authorised broker, you get to dictate how your business operates, without anyone overseeing your choices."
Key Differences:
Control: Directly authorised brokers have complete control over business operations, processes, and strategy.
Compliance: Directly authorised brokers are responsible for their own FCA compliance, while network brokers rely on their network for compliance support.
Revenue: Networks take a percentage of your commission, whereas directly authorised brokers retain all earnings, minus any costs for compliance support.
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The Application Process: How Mortgage Brokers Become Directly Authorised
For mortgage brokers considering becoming directly authorised, there are two main ways to apply:
Apply Directly to the FCA: You can submit an application through the FCA’s Connect portal. This involves providing detailed information about your firm’s structure, compliance processes, financial projections, and business plan. This route is best suited to brokers who are comfortable navigating the paperwork and understand the full scope of FCA compliance requirements.
Use a Compliance Firm: Most brokers choose to work with compliance support firms like Simply Biz. These firms act as intermediaries, guiding you through the authorisation process, ensuring all regulatory requirements are met, and assisting with paperwork.
Rob Thomas used Simply Biz to become directly authorised. "They helped me through the paperwork and handled much of the legwork with the FCA. The process took about 11 months," he explains. "Although it was lengthy, using a firm like Simply Biz eased a lot of the pressure."
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FCA Compliance for Directly Authorised Mortgage Brokers
Once you’re directly authorised, maintaining ongoing compliance is a critical part of your role. The FCA requires mortgage brokers to follow strict guidelines to protect consumers and prevent financial misconduct. Key areas to focus on include:
Anti-Money Laundering (AML): You must implement systems to detect and report suspicious transactions.
Data Protection and GDPR: Ensure all client information is handled securely and complies with data protection laws.
RegData Reporting: Directly authorised brokers are required to submit quarterly reports to the FCA via RegData, detailing your firm’s financial health and operations.
Rob Thomas advises getting your compliance processes in place early on. "The first year was challenging, but once my compliance system was set up, managing everything became easier."
Additionally, brokers must comply with the Senior Managers and Certification Regime (SMCR), which holds senior team members accountable for the firm's operations and compliance.
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Costs of Becoming a Directly Authorised Mortgage Broker
Becoming directly authorised comes with several costs. While you gain the benefit of keeping 100% of your commission, there are upfront and ongoing expenses to be aware of.
Here’s a breakdown of the main costs:
FCA Annual Fees: Approximately £1,800 annually, plus an additional £150 for the Financial Ombudsman Service.
Professional Indemnity Insurance (PII): Mandatory insurance that typically costs between £2,000 and £5,000 annually, depending on your firm’s size and risk profile.
Compliance Support: Firms like Simply Biz provide ongoing compliance support, which usually costs around £253 per month.
Capital Adequacy: The FCA requires firms to maintain a minimum of £10,000 in liquid capital to ensure the business is financially stable.
Rob recommends doing a detailed financial analysis before becoming directly authorised. "I was paying tens of thousands of pounds to my network in commission cuts. Going DA allowed me to keep that money and reinvest it back into my business."
Benefits and Challenges of Being a Directly Authorised Mortgage Broker
Benefits:
Full Control: As a directly authorised mortgage broker, you have complete autonomy over your processes, lender relationships, and business decisions.
Retain All Commissions: You get to keep 100% of your commissions, rather than sharing earnings with a network.
Tailored Compliance: While you’re responsible for compliance, you can create a system that works best for your business.
Challenges:
Increased Responsibility: You’re solely responsible for ensuring FCA compliance, managing complaints, and meeting all regulatory requirements.
Capital Requirements: You must maintain a minimum of £10,000 in capital, which can be challenging for smaller firms.
Ongoing Costs: Compliance support, FCA fees, and Professional Indemnity Insurance can add up, so you need to ensure your business can cover these costs.
Is Going DA Right for You? Weighing Direct Authorisation vs. Appointed Representative (AR)
Before making the switch to direct authorisation, it’s worth considering whether it’s the right move for you. Many mortgage brokers work as Appointed Representatives (ARs) within a network, which provides structure, compliance, and shared responsibility. However, this often means giving up control and a portion of your earnings.
Pros of Going DA:
Complete control over your business and compliance processes.
Retain all commissions and increase profitability.
Flexibility to operate the way you want.
Cons of Staying as an AR:
Networks take a percentage of your commissions, reducing your earning potential.
Less control over how your business operates.
Compliance is managed externally, which may not suit brokers seeking independence.
Rob sums it up well: "If you’re confident in your ability to manage FCA compliance and want more control over your income, becoming directly authorised is the way to go. But if you’re not ready for the responsibility, staying with a network might be the safer choice."
FAQs for Mortgage Brokers
1. What are the compliance requirements for directly authorised mortgage brokers?
Directly authorised mortgage brokers must comply with anti-money laundering (AML) rules, data protection laws, and submit RegData reports to the FCA quarterly.
2. How much does it cost to become directly authorised?
The initial cost of applying is around £2,000, and ongoing annual fees include £1,800 for the FCA and £150 for the Financial Ombudsman Service. Professional Indemnity Insurance costs range from £2,000 to £5,000 annually, and compliance support fees are around £253 per month.
3. How long does it take to become directly authorised?
The process generally takes 6-12 months, depending on the complexity of your application and the FCA’s workload.
4. What happens if my direct authorisation application is rejected?
If your application is rejected, the FCA will provide feedback. You can reapply after addressing their concerns, but you’ll need to strengthen your business plan, compliance measures, and financial standing before reapplying.
Conclusion
For mortgage brokers looking to take full control of their business, becoming directly authorised offers significant financial and operational benefits. However, it also comes with increased responsibilities, particularly around compliance and financial stability. Weigh the pros and cons of becoming DA carefully, and ensure you are fully prepared for the challenges before making the switch.
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