Becoming an appointed representative.
So, you’re thinking of setting up an insurance brokerage. You’re an experienced account executive or an insurance professional with an eye for a great business opportunity. Whatever your reasoning, deciding which route to take to become authorised is a big decision.
On one hand, you can become directly authorised with the FCA, a process that can take 6 to 12 months. It will also cost you between £6,500 and £75,000 to get authorised and satisfy the FCA’s capital requirement. Alternatively, you can partner with Momentum as an insurance Appointed Representative for a fraction of the time and cost.
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Why become an appointed representative with Momentum?
Becoming an appointed representative gives you a quicker route to market. On top of your own insurance experience and technical knowledge, you will need commitment and drive to make your business succeed in a competitive industry. Partnering with Momentum gives you a solid foundation to grow your business and access to a range of services that every insurance broker needs.
Partnering with Momentum gives you a broad range of insurance support services. Need help to put together your budget or business plan? Our back-office team has people who love nothing more than some number-crunching. Want some advice on lead generation? Our marketing team are on hand. Just tell us what you need help with, and we will find the right person to provide it.
As well as business support, Momentum looks after the following areas on behalf of our Appointed Representatives:
- Governance framework
- Insurer agencies
- Client money handling
- FCA reporting
- Professional Indemnity insurance
- FSCS & FCA fees
- Client relationships
- Regulatory and compliance advice
Low set-up costs
Momentum will undertake FCA authorisation on your behalf using a combination of our own due diligence and the FCA application process. This means there is little or no cost to you and as we also meet the FCA capital requirement, the only capital you will need is the amount required to run your insurance brokerage.
As we are already authorised by the FCA, the authorisation process for you as one of our ARs is much shorter than if you were directly authorised. We will be responsible for FCA reporting on your behalf, as well as any FCA and FSCS fees. You will also be covered under Momentum’s Professional Indemnity insurance – another saving at a time when every penny counts.
A ready-made governance framework
When you start trading as an insurance broker, you must ensure you have adequate governance systems and controls in place to run your business properly. Momentum will supply you with a ready-made, proven framework to ensure you comply with FCA requirements.
A market-leading IT system
Technology has disrupted the insurance world over the past few years. It is essential that, as a Momentum AR, your broking platform is efficient and both customer and user-friendly. That is why we provide you with Acturis, a market-leading broking platform that offers outstanding service and functionality.
Access to broking experts
Our experienced brokers will source tailored policies for your clients at the best price we can negotiate. Our account handlers will be there to deal with your day-to-day queries. Finally, we’ve got a team of private client experts ready to discretely take care of your high-net-worth clients.
Excellent market coverage
Our team of qualified and experienced staff pride themselves on providing unrivalled broker support to all our partners. We’ve spent years building relationships with insurers across the UK and the London and international markets, meaning you’ll have access to markets a smaller broker wouldn’t usually have.
Insurance placement is made through Momentum’s substantial agency base. We have access to a broad range of insurers and products, which means that as one of our Appointed Representatives, you’ll be able to provide your clients with a high-level service
Compliance peace of mind
Meeting and maintaining the regulatory requirements of the FCA is a key element of running an insurance brokerage. As a Momentum AR, the regulatory burden shifts to us. This means we deal with changing regulations, fees and FCA reporting. Our exceptional compliance team will keep you updated with regulatory changes and are always on hand to answer any compliance-related questions you may have.
Guaranteed client ownership
As a Momentum appointed representative, you have full ownership of your clients. We will not make direct contact with your clients unless you ask us to or we absolutely have to, and if it doesn’t work out with Momentum, you take them with you.
“Momentum is a great trading partner for Ageas. Over the past couple of years, we have developed a close working relationship that has translated into a growing book of profitable business. The Momentum model is incredibly valuable to us, it gives us access to some skilled and experienced brokers around the country that otherwise might not have been on our radar.”
David A Scott, Commercial Trading Manager Ageas,
What is an insurance appointed representative?
The dictionary definition of an appointed representative (AR) is someone (in this case, you) who acts as an agent for a Principal firm (us). The AR then conducts the regulated activity – selling insurance – on the Principal’s behalf. Becoming an appointed representative for Momentum, however, means we’ll work in partnership to help you create a successful, long-term business.
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The rise of the appointed representative.
For a long while the appointed representative (AR) business model in the general insurance market has not had the same acceptance as directly authorised brokers. The perception in the UK has not been helped by several major brokerages attempting to build an AR model as an adjunct to their own brokerages. They have done this in a variety of formats, with little uniformity, adding to the confusion surrounding the model, and often in conflict with their own retail brokerages.
In the broader financial services world, however, this is a prevalent way of trading, with thousands of IFAs operating in this manner, from sole traders to substantial businesses. In other parts of the world, AR models, or variations of them, are broadly recognised as a valuable part of the insurance community.
Unlike financial services, there are very few dedicated providers to ARs in the UK general insurance market.
Originally the AR model was largely in response to the transfer in regulation under the Insurance Brokers (Registration) Act 1977 to regulation by the Financial Services Authority in January 2005. This increased the burden of regulation and few entrepreneurs really want to spend a chunk of their time with administration.
Since 2005, consolidation along with the increasing complexity and cost of systems have made it harder for the small directly authorised broker to compete.
The AR model is therefore increasingly seen as the most relevant for start-ups and small independents – not just an alternative to direct authorisation.
“The Momentum model is a great opportunity for us to work on quality business from community brokers, and because everything is handled by the Momentum hub, the process is quick and efficient – it’s the best of both worlds for us. It’s really exciting to work with a partner broker in a different and innovative way.”
Jason Howes, Regional Manager, Allianz
Client ownership – Beware of the small print
One of the benefits of making the move from traditional account executive to appointed representative is the ability to build and nurture a client book of your own. The value in a book of loyal clients is well understood in the market and becoming an appointed representative can allow individuals with client skills to harness that value and make it work for them. You might be building a family business to hand down the generations or expanding your retirement fund – whatever your plans, building your own business can be a great way to get the maximum reward for your skills both in financial and accomplishment terms. The appointed representative model makes this especially simple as there are reduced overheads and significant scope for growth and development with other AR businesses.
But what if when all your hard work starts to pay off, you discover that reaping the rewards might be a costly, or even impossible, process? We have come across several variations of the AR contract and they can be complex and difficult to interpret. Client ownership is always a tricky subject (can anyone really own a client?) but what is clear is that if a covenant or other contract term prevents you from dealing with your dependable client base then they have no value to you and we see people giving this value away all the time. The most common contract variations we see are:
- Yours, for a small fee’ – Should you wish to take your clients elsewhere, that’s fine, you can buy them back from your principal firm for a fixed fee or a percentage of income – sometimes both. The fees can be high and contracts one-sided. Paying a fee to exit may not seem an issue when you’ve built up a large valuable book but if things don’t work out and you want to move to a different principal, the costs could make that tricky.
- ‘Yours. But…’ – Often used by the larger brokers who are working with AR’s as a side-line, these contracts make it clear that you are free to take your clients should you wish to leave but whilst under contract, your clients become familiar with the broker brand and additional support team that they provide (their account handler and claims support) so when you come to leave, the book is worth very little without the central support and corporate brand behind you. Establishing your own brand is, in our view, an essential element of business – you don’t want to work hard to support someone else’s!
- ‘The AR who never was’ We have come across a surprising number of people who believe that they are an appointed representative when, in fact, they are not. Sometimes they are set up as a trading name or a subsidiary of their principal firm – if you want to check your AR status you can do so with a quick search on the FCA Register. Unless the issue of client ownership is dealt with explicitly in any contract, in this scenario the clients are likely to belong to the main firm and be subject to normal covenants.
A good AR contract will make it clear that they are and will always remain your clients. To meet FCA requirements, it will need to include protection for the principal, should they need to take control of the clients for any reason, but that is only in exceptional circumstances. We would also recommend servicing them under your own brand so that they buy into you, rather than a corporate entity.
If you have got the client ownership sorted, then there are a couple of other things that you should look out for in your appointed representative contract. Hold-harmless clauses and open-ended liability should be avoided, and you should check to see what responsibilities your principal has to help ensure a smooth transfer should you wish to leave. Will they provide access to your client data? Will they agree a block transfer? Unfortunately, these are the kind of questions that no one thinks about until you need them and then it is too late.
Our advice would always be that if you are not sure, seek some legal advice. It should not cost the earth and it could save you thousands in the long run. In any event as a rule of thumb, if the contract seems overly complex you would be right to be concerned – after all in a genuine partnership the contract should be equally balanced.
At Momentum there are no hidden costs, the clients are always yours and we have tried to make the contract as simple as possible – after all successful partnerships are based upon common interests and understanding.
Join the UK’s leading appointed representative network for general insurance brokers
We are a dedicated appointed representative network with no direct clients. For us to be successful, our ARs need to be successful.
The relationship we have with our broker partners is more than a network – it goes far beyond access to the insurance market. It is a genuine partnership, bound by the same interest – the growth and development of the business.