Leaving an IFA network — the PI transition every AR firm should understand

Moving out of an IFA network — whether to become directly authorised, to join a different network, or to close the practice — involves specific PI considerations that AR firms don't always anticipate. This page maps what happens to cover during and after transition.

The AR to DA transition

1. AR firms operate under the principal network's FCA authorisation. PI cover flows through the principal, either directly or via the network's block policy.
2. Moving to DA requires: new FCA authorisation as a firm; own PI cover meeting MIPRU 3 / ICOBS 5A; own Consumer Duty framework; own MIPRU 4.4 capital position; own complaints procedure under DISP.
3. Transition timing: typically 6-12 months from decision to full DA authorisation.
4. PI cover for the DA period must be in place from authorisation date — not a day later.

Run-off from the network

1. For work done during the AR relationship, the network's PI arrangement continues to cover the AR firm for the tail.
2. Confirm this specifically at exit — some network agreements limit run-off; some don't.
3. The FCA expects run-off provision for AR-period activity — adequate to the ongoing liability tail.
4. Individual advisers face personal accountability under SMCR for work done as ARs even after the AR relationship ends.

Joining a different network

1. New network's PI arrangement covers ongoing AR activity.
2. Prior network's run-off covers AR-period activity from the earlier relationship.
3. Advisers with continuing individual accountability need continuity of personal cover if applicable.
4. Client transfer arrangements — complaint-handling responsibility for existing client relationships needs to be clearly documented.

Closing the practice entirely

1. Confirm network run-off adequacy for AR-period activity.
2. Individual advisers face continuing personal exposure — DB-transfer advice, historic complaints, FCA thematic reviews.
3. Personal PI cover post-cessation may be needed for individuals with material personal exposure.
4. Regulatory notifications — FCA and SMCR-related.
5. Client-transfer or run-off arrangements for existing client relationships.

Common transition mistakes

1. Not confirming run-off in writing. Assumption that network covers historic AR activity indefinitely without explicit confirmation.
2. Coverage gap on DA start date. New DA firm without PI cover in place on authorisation day.
3. Personal exposure ignored. Advisers assume network protects them personally under SMCR — not always the case.
4. Complaints in transition. Existing complaints during transition need clear responsibility allocation.
5. Consumer Duty gap. DA firm without documented Consumer Duty framework from day one.

Timing and process

1. Decision point — 12 months before intended DA date.
2. FCA application — 6-9 months from application to authorisation.
3. PI market run — 3-6 months before DA date, engage specialist broker.
4. Network exit — confirm exit terms and run-off provision in writing.
5. DA go-live day — own PI incepts, Consumer Duty framework live, MIPRU 4.4 capital in place.

Frequently asked

Related reading

• Consumer Duty for IFAs — PI implications
• Directly authorised vs appointed representative
• PI insurance for start-up IFAs
• IFA sector pillar