Contents
Before we get started
Qualifying as an Independent Financial Adviser is an important milestone, but it doesn’t automatically mean that you are ready to start advising clients.
Before providing regulated advice, you need to confirm that:
- You are working through the correct regulatory structure
- The firm has permission for the advice you intend to provide
- Your qualifications have been verified
- You hold a valid Statement of Professional Standing, where required
- Your firm or network has assessed your competence
- Any supervision or pre-sale review requirements are clear
- You understand the approved advice process
- You have access to the systems and documents you need
At first glance, that might look like a lot. That’s why this guide offers a step-by-step explainer of the core FCA compliance requirements every new IFA needs to understand. It’s particularly relevant to advisers planning to join a network like ValidPath as an Appointed Representative (AR), but it also explains how this differs from becoming Directly Authorised.
This guide assumes that you will provide retail investment advice. Additional requirements may apply if you advise on mortgages, pension transfers, equity release or other specialist areas.
You don’t need to manage compliance alone
ValidPath gives Members practical guidance shaped around their business, so they can meet regulatory requirements while preserving their independence.
Speak to ValidPath about the compliance support available to Members.
Looking for our IFA Compliance Checklist?
This guide focuses on the foundations you need before you begin advising clients. Once these are in place, use our Independent Financial Adviser Compliance Checklist to review your wider responsibilities across Consumer Duty, record keeping, training, suitability, complaints and financial promotions.
Step 1. Decide how you will be regulated
Passing the relevant exams doesn’t give you permission to undertake regulated activities independently. Your advice must be provided through an FCA-authorised firm.
There are three main routes.
Join an existing authorised firm
In this case, the firm holds the necessary FCA permissions and is responsible for its firm-level systems and controls.
Before advising clients, obtain written confirmation of:
- The activities and products you may advise on
- The types of clients you may work with
- Your competence status
- Any supervision or pre-sale checks that apply
- Who must approve your advice and communications
- The date from which you may begin advising
Become Directly Authorised
A Directly Authorised firm applies for its own FCA permissions and takes direct responsibility for its governance, regulatory reporting, financial resources, insurance and compliance framework.
This route provides direct control, but it also creates a significant regulatory and operational workload. Anyone considering it should use the FCA’s current authorisation guidance and obtain appropriate specialist support.
Join a network as an Appointed Representative
An AR undertakes agreed regulated activities under the responsibility of an authorised Principal firm, such as an IFA network. Indeed, hundreds of IFAs have started and built their businesses as Members of ValidPath.
The Principal must assess the AR before appointment, enter into a written agreement defining what business the AR can undertake and notify the FCA before the appointment takes effect. Then, it must continue to oversee the AR and make sure it operates within the agreed scope.
Before you begin advising as an AR, you will normally need to:
- Complete the Principal’s firm-level and individual due-diligence checks.
- Agree which regulated activities you may undertake.
- Provide the information required for the Principal’s FCA notification.
- Complete any required training and competency assessments.
- Set up the Principal’s approved systems and processes.
- Agree any supervision or pre-sale checking arrangements.
- Wait for written confirmation that your appointment is effective.
- Check that your public regulatory information is correct.
The Principal manages your appointment and firm-level regulatory oversight. You remain responsible for following its processes, maintaining complete records and providing suitable advice. At ValidPath, that oversight is designed to support rather than standardise your business, helping you meet regulatory requirements while prioritising your independence.
For more on the difference between the DA and AR routes, you can read about why DA firms are switching to ValidPath for compliance support.
Step 2. Confirm that you are personally ready to advise
Being qualified and being assessed as competent are not the same thing.
Before advising clients, confirm each of the following.
Your qualifications cover the work
Your qualifications must be appropriate for every regulated activity you intend to undertake.
Do not assume that a general financial planning qualification covers specialist areas such as pension transfers, equity release or mortgages. These may require additional qualifications, permissions or supervision.
Keep copies of:
- Qualification certificates
- Examination records
- Previous competency assessments
- Regulatory references
- Training and development records
Your firm or Principal should verify and retain the evidence it requires.
You hold a valid Statement of Professional Standing
Retail investment advisers must obtain a Statement of Professional Standing, or SPS, from an FCA-accredited body and make the required annual declarations.
Keep your own copy, provide it to your firm or Principal and record its renewal date so that it doesn’t expire while you are advising.
Your Competent Adviser Status (CAS) is confirmed
Your firm or Principal is responsible for assessing whether you are competent to advise. Passing your examinations does not replace this assessment.
You should receive written confirmation that either:
- You have been assessed as competent to advise within an agreed scope, or
- You must work under supervision while completing further development
Where supervision applies, confirm:
- Who your supervisor is
- Which activities you may undertake
- Which cases require pre-sale approval
- Whether client meetings will be observed
- What evidence will be used to assess you
- When your competence will next be reviewed
Don’t assume that supervision has ended because you have completed a certain number of cases. Wait for written confirmation. At ValidPath, advisers working towards competency status receive structured supervision and practical support to help them develop the evidence and experience they need.
You have a CPD process
Retail investment advisers must complete at least 35 hours of relevant continuing professional development each year, including at least 21 hours of structured learning. Your firm is responsible for monitoring your ongoing competence and CPD.
Your CPD record should show:
- The development need you identified
- The activity you completed
- The date and duration
- Whether it was structured or unstructured
- What you learned
- How the learning applies to your role
- Any supporting evidence
Step 3. Understand what your Principal handles – and what you still need to do
Joining a network gives you access to firm-level oversight and compliance support. It does not transfer every responsibility away from you.
Your Principal will normally manage or oversee
- The firm’s FCA permissions
- Your AR appointment notification
- Firm-level regulatory reporting
- Compliance policies and approved processes
- Adviser supervision and file reviews
- Regulatory guidance
- Complaints handling arrangements
- Financial promotion approval processes
- Consumer Duty monitoring
- The escalation of regulatory breaches
ValidPath covers all of these areas as your Principal. Other networks may divide responsibilities differently, so make sure you understand exactly what support and oversight are included before joining.
You remain responsible for
- Acting only within your permissions and competence
- Following the approved advice process
- Providing complete and accurate information
- Keeping client records up to date
- Completing required training
- Escalating complaints and concerns immediately
- Submitting materials for approval where required
- Completing remedial actions within the agreed timescale
- Delivering the services clients are paying for
The Principal accepts regulatory responsibility for the activities covered by the AR agreement, but you must provide the information and cooperation it needs to fulfil that responsibility. As a ValidPath Member, you can speak directly to our compliance team whenever you need help understanding or meeting your responsibilities.
Step 4. Learn the approved processes before accepting clients
As an AR, you will not usually need to create an entire compliance framework from scratch. You do need to understand and follow your Principal’s approved processes.
At ValidPath, our approach is to provide guidance rather than impose a one-size-fits-all way of working. Our Compliance Support and Monitoring teams – many of whom have backgrounds in advising or paraplanning – work with you to make sure your processes meet regulatory standards with as little unnecessary disruption as possible. You’ll also have integrated technology to help you keep compliance evidence organised, accurate and easy to access.
Before advising your first client, make sure you know how to handle:
- Client identity and due-diligence checks
- Sanctions and politically exposed person checks
- Conflicts of interest
- Vulnerable clients and support needs
- Fact-finding
- Risk and capacity-for-loss assessments
- Product, provider and platform research
- Suitability reports
- Ongoing reviews
- Complaints
- Data breaches
- Financial promotions
- Introducers and referral arrangements
- Compliance concerns and potential breaches
For each process, confirm:
- Which form or system you must use
- What evidence you need to retain
- Who must approve the work
- When the matter must be escalated
- Which deadlines apply
- Where the final record must be stored
A process is only ready when you understand what to do, can access the required systems and can demonstrate that you followed it.
Step 5. Follow a complete client advice process
Your client file should clearly show how you moved from understanding the client’s needs to making and implementing a suitable recommendation.
Confirm that you can accept the client
Complete the required:
- Identity and address checks
- Customer due diligence
- Sanctions and PEP checks
- Conflict checks
- Target-market checks
- Permissions and competence checks
Follow your Principal’s approval process for any higher-risk clients or work.
Explain the service and charges
Before the client commits, explain:
- The firm’s regulatory status
- Whether the advice is independent or restricted
- What the service includes
- What it does not include
- Initial and ongoing charges
- How charges will be collected
- How the client can cancel
- How to make a complaint
- How the client’s personal data will be used
Keep evidence of the information provided and the client’s agreement.
Complete the fact-find
Record enough information to understand the client’s:
- Personal and family circumstances
- Income and expenditure
- Assets and liabilities
- Objectives and priorities
- Time horizon
- Knowledge and experience
- Existing arrangements
- Tax position
- Protection needs
- Expected future changes
Don’t leave material gaps without recording why the information was unavailable and how this affected your ability to advise.
Assess risk and capacity for loss
Consider and document:
- Attitude to risk
- Capacity for loss
- Knowledge and experience
- Investment timescale
- Access requirements
- Any conflict between the risk the client wants to take and the loss they can afford
Don’t rely on a questionnaire score without considering the client’s wider circumstances.
Identify vulnerability and support needs
Consider whether the client’s health, life events, resilience or capability could affect how they understand information, make decisions or engage with the service.
Record any adjustments made, such as:
- Providing information in a different format
- Allowing more time
- Offering additional explanations
- Involving an authorised third party
- Changing how or when you communicate
- Reviewing the client’s needs more frequently
Record your research and recommendation
Your file should explain:
- Which options were considered
- Why the recommendation meets the client’s objectives
- How costs and risks were assessed
- Why alternatives were rejected
- How the recommendation fits the firm’s investment proposition
- Why any departure from the normal proposition was appropriate
Generic research or standard wording is not enough unless it is clearly connected to the individual client.
Complete the file
Before marking the case as complete, confirm that the record contains:
- The completed fact-find
- Risk and capacity-for-loss evidence
- Research and due diligence
- The suitability report
- Cost and charge disclosures
- Meeting notes and material communications
- Any required compliance approval
- Evidence of implementation
- Outstanding actions and their owners
- The next review date, where relevant
If your reasoning and communications are not properly recorded, the firm may not be able to demonstrate that the advice was suitable. As a ValidPath Member, you’ll have access to practical guidance, file reviews and integrated systems to help you evidence each stage of the advice process clearly and consistently.
Step 6. Build Consumer Duty into your work
Consumer Duty requires firms to act to deliver good outcomes for retail customers. Its four outcomes cover:
- Products and services
- Price and value
- Consumer understanding
- Consumer support
For an adviser, this means being able to show that:
- The service is appropriate for the client’s needs
- The client receives fair value
- Communications are clear and understandable
- The client can access appropriate support
- Vulnerable clients receive suitable adjustments
- The promised service is delivered
- Problems and poor outcomes are identified and addressed
Your Principal may ask you to supply information on:
- File-review results
- Complaints
- Delayed or missed reviews
- Client disengagement
- Vulnerability and support needs
- Service delivery
- Fees and value
- Client understanding
- Recommendation patterns
Provide this information accurately and on time. Firms must monitor the outcomes customers receive rather than relying only on evidence that a process exists. At ValidPath, our compliance team helps Members understand what evidence is needed and how to apply Consumer Duty requirements within their own business.
Step 7. Deliver any ongoing service the client pays for
Where a client pays an ongoing charge, the service must be clearly defined and delivered.
The agreement should explain:
- What the client will receive
- How often reviews will take place
- What the review will cover
- What the service costs
- How the client can cancel
- What happens if the client does not respond
Your records should show:
- When each review was due
- When the client was contacted
- Any follow-up attempts
- Whether the client accepted, declined or did not respond
- Whether the review was completed
- The written outcome
- Any resulting recommendation
- Whether the ongoing charge remains appropriate
The FCA states that an ongoing charge can only be taken where an ongoing service is being provided, and the details, charges and cancellation arrangements must be confirmed to the client. Its review of advice firms also reinforced the need to make sure clients receive the services they pay for.
For more detail on conducting the review itself, read What Does a Good Annual Suitability Review Look Like?
Step 8. Know what to do when something goes wrong
Mistakes and concerns should be recorded and escalated, not corrected quietly.
Follow this process:
- Protect the client. Pause the affected activity where necessary.
- Preserve the evidence. Retain the file, communications and system records.
- Escalate the matter. Tell your compliance contact or Principal immediately.
- Follow the correct process. Use the required complaint, breach or incident procedure.
- Complete the remediation. Correct the issue and address any client harm.
- Check for wider impact. Identify whether other clients or cases are affected.
- Address the cause. Update training, systems, templates or supervision.
- Confirm completion. Retain evidence that every agreed action has been completed.
As an AR, don’t investigate complaints, contact regulators or settle potential claims outside your Principal’s approved process unless you’ve been authorised to do so. At ValidPath, our compliance team is always here to help you understand the correct process and take the right next steps.
Good compliance does not mean that a mistake can never happen. It means identifying problems quickly, being open about them and completing the required action.
Compliance checklist for new IFAs
Before advising your first client
Confirm that:
- Your regulatory route has been agreed
- The firm’s permissions cover your intended work
- Your employment or AR appointment is effective
- Your public regulatory information is correct
- Your qualifications have been verified
- You hold a valid SPS where required
- Your competence status has been confirmed
- Any supervision requirements are documented
- You have completed the required training
- You can access the approved systems and templates
- You understand the complaints and escalation process
- You know how financial promotions are approved
- You understand the complete client advice process
For every client
Confirm that:
- The work is within your permissions and competence
- Due-diligence checks are complete
- Conflicts have been considered
- The service and charges have been explained
- The fact-find is complete and current
- Risk and capacity for loss have been assessed
- Vulnerability and support needs have been considered
- Research and due diligence are recorded
- The suitability rationale is personalised
- Any required approval has been obtained
- Implementation is evidenced
- The client file is complete
- Follow-up actions and review dates are recorded
Every year
Complete:
- SPS renewal
- Required CPD
- Competence and fitness assessments
- Mandatory training
- A review of your client documents and communications
- A review of ongoing service delivery
- Any monitoring or information requests from your Principal
Frequently asked questions
Can I advise clients as soon as I pass my exams?
No. You must also work through an authorised firm, hold any required SPS, have your qualifications verified and be assessed as competent or placed under appropriate supervision.
Does every IFA need an SPS?
An SPS is required for retail investment advisers. Other advisory roles may be subject to different professional standards and qualification requirements.
Is my network responsible for all of my compliance?
Your Principal accepts regulatory responsibility for the activities covered by your AR agreement. You must still follow its processes, maintain complete records, provide accurate information and cooperate with its oversight. As a ValidPath Member, you’ll have direct access to our compliance specialists for practical guidance whenever you’re unsure what’s required.
Do I send complaints or financial promotions directly to the FCA?
Not ordinarily as an AR. Follow your Principal’s process for escalating complaints and submitting communications for approval.
What is the difference between becoming Directly Authorised and becoming an Appointed Representative?
A Directly Authorised firm holds its own FCA permissions and is directly responsible for its regulatory reporting and compliance framework. An AR undertakes agreed regulated activities under an authorised Principal, which accepts responsibility for those activities and provides ongoing oversight.
Start your IFA career with the right support
Becoming qualified is only one part of being ready to advise.
Good compliance means understanding what is expected, following the approved process and keeping enough evidence to demonstrate that every recommendation is suitable and every promised service has been delivered.
ValidPath can support you through onboarding, competency, technology setup and ongoing compliance while giving you the freedom to build your business your way.
Contact ValidPath today to find out how our compliance team can support you from onboarding and competency through to running a compliant, independent IFA business.
