New FCA data points to a widening structural divide between directly authorised firms and network-backed businesses across wealth and mortgage advice.

Fresh figures obtained through a Freedom of Information request to the Financial Conduct Authority by Network Consulting suggest the directly authorised advice market is undergoing a period of sustained contraction, particularly among wealth-focused firms.

The data, which covers the five years from 2020 to 2025 and excludes any firm categorised as a network, shows a clear decline in the overall number of directly authorised intermediary firms operating in mortgages, wealth, or both. Over the period, firm numbers fell by 17.2%, equating to a net loss of 1,853 businesses.

The sharpest contraction has been among firms advising on both wealth and mortgages, where numbers have dropped by 24.4%, or 957 firms. Wealth-only firms have also seen significant attrition, falling by 19.4%, a reduction of 1,054 firms.

MORTGAGE-ONLY

Mortgage-only firms have proved more resilient. Their numbers increased by 11% between 2020 and 2025, adding 158 firms overall. However, this masks a recent slowdown, with firm numbers slipping by 55, or 4%, from a peak reached in 2023. When all firms active in mortgage intermediation are considered together, the sector has still seen a net fall of 799 firms, representing a decline of 15%.

Adviser numbers tell a more nuanced story. A pronounced rise between 2020 and 2021 largely reflects regulatory changes, as solo-regulated firms were not required to submit Directory Persons data until 31 March 2021. This has often led to a misconception about the scale of directly authorised firms, the majority of which remain single-adviser operations.

Since 2021, mortgage adviser numbers have remained broadly stable, rising by around 2%, or roughly 300 advisers. By contrast, the number of wealth advisers has fallen by 1,333 over the same period, a decline of 12.5%.

REASONS WHY

Several structural factors appear to be driving this trend. Adviser retirement continues to reduce numbers, reflecting the ageing profile of the advice population. At the same time, a growing number of advisers are choosing to move from direct authorisation to appointed representative status, drawn by the regulatory, operational and compliance support offered by networks.

This shift is reinforced by separate FCA data on new direct authorisation approvals. An FOI response to Network Consulting shows that approvals fell by 75% between 2020 and 2024, pointing to a markedly reduced appetite for entering the market as a directly authorised firm. Higher threshold conditions, increased regulatory responsibility following the introduction of Consumer Duty, and the perceived complexity of the application process all appear to be contributing factors.

In contrast, the appointed representative market has shown relative stability. Network Consulting’s league tables, published since 2022, indicate that the top 30 mortgage networks have broadly held their ground, with modest growth in both firm and adviser numbers. The number of appointed representative firms is up 0.03%, while adviser headcount has increased by 1.7%.

This growth has been achieved despite notable exits, including the departure of Tenet Group and the removal of two smaller networks that fell below the 20-firm reporting threshold. Together, these accounted for 34 firms and 120 advisers, suggesting that underlying network demand remains resilient.

The diverging trends raise strategic questions for advice firms weighing up their future operating models. As the directly authorised market tightens, networks increasingly present themselves as a stable platform for growth, compliance oversight and operational scale. For many firms, however, the decision remains finely balanced and dependent on careful due diligence and long-term planning.

INCREASING COMPLIANCE

Ahmed Bawa, ceo at Rosemount Financial Solutions (IFA) limited, said: “We have seen increased interest from DA advisers in recent months, and it’s easy to understand why.

“The compliance requirements faced by advisers continues to increase, taking up more time the adviser could devote towards doing what they do best – helping their clients secure their long-term financial future.

“Similarly, the operational and technological support on offer by adopting the AR route opens up new opportunities for advisers, allowing them to be more proactive and strategic in building their own business. It’s a trend that I would expect to see continue in 2026 and beyond as the benefits of working within a network become even clearer.”

TURNOVER BOOST

And he added: “I know that the DAs who have joined Rosemount have seen their turnover and, most importantly, their profitability increase.

“For networks, the key is to make the transition from DA to AR as smooth and straightforward as possible, while ensuring the adviser receives personalised, bespoke support which will ensure their business thrives in the future. Just as all clients are unique, so too are advice firms, and networks have a duty to deliver a tailored support package based on their individual needs and aspirations.”

IMPROVED EFFICIENCY

Haydn Thomas, chief executive officer at Cornerstone Finance Group, added: “For me, the choice between being a DA or an AR comes down to what the principal(s) are really trying to achieve.

“It should be a positive step towards something, not a move away from something, if you want to feel satisfied with the decision.

“When a network is working well, it can ease the regulatory load, cut costs in areas such as PI, and improve efficiency. That can support profit, even after network fees are taken into account.

“Running a firm can also feel isolating, whether you are a DA or an AR principal. I see part of our network relationship managers’ role as being a coach, mentor and trusted sounding board.”