DA Market Decline vs. Network Growth: Key Insights for Investors

Understanding the Changing Landscape of Directly Authorized Firms

Recent data released through a Freedom of Information (FOI) request to the Financial Conduct Authority (FCA) reveals a critical transformation in the UK's retail intermediary market for mortgages and wealth management. The market appears to be diverging sharply, with a contraction in the number of Directly Authorized (DA) firms juxtaposed against the slow growth of networks designed for appointed representatives (AR).

The DA Market's Decline: What the Numbers Reveal

From 2020 to 2025, the total number of DA firms operating in the retail advice space has fallen by 17.2%, which equates to a loss of 1,853 firms. Particularly pronounced is the decline among firms that serve both mortgage and wealth segments, showing a staggering 24.4% drop, while wealth-only firms experience a 19.4% reduction. In contrast, mortgage-only firms have survived the storm better, with an 11% growth over the same period, increasing by 158 firms despite recent dips.

A Closer Look at Advisers: The Dual Narrative

Advisers present a mixed bag of trends. When analyzed, the overall number of mortgage advisers remained relatively stable with a 2% increase since 2021, which highlights the profession's resilience. However, wealth advisers faced losses, declining by 12.5% -- a total of 1,333 advisers. This nuanced picture points to underlying issues facing wealth management and suggests potential vulnerabilities in the sector.

The Ageing Adviser Population: Implications for the Industry

One of the primary factors contributing to this attrition is the aging demographic of advisers, compounded by the retirement trend. With many experienced advisers exiting the industry, there's an urgent call to attract younger talent into the field. The process is complicated by the fact that many advisers have opted to become appointed representatives, seeking the backing of networks as an answer to increasing challenges and regulatory demands.

The Network Advantage: Stability Amidst Chaos

In sharp contrast to the DA sector's plight, networks, as highlighted in supplementary data, have exhibited minor growth despite the exit of some players. The top 30 networks have seen their adviser numbers increase by 1.7%. This stability has been enticing for advisers seeking a more secure operational structure amid rising regulatory scrutiny, particularly after the Consumer Duty trend has been instilled. Networks provide vital operational support and compliance oversight that many DA firms now feel the need for.

Regulatory Landscape: A Barrier or a Necessity?

According to FOI data, the fall in DA application approvals—down by 75% between 2020 and 2024—suggests a evolving regulatory framework that is becoming increasingly stringent. The complexity and perceived burdens associated with the DA application processes could deter potential entrants into this market. The challenge now lies in understanding how these additional responsibilities will impact both DA firms and networks moving forward.

Strategic Considerations for Future Direction

As the DA market contracts, the approach of choosing between maintaining an independent status or transitioning to a network becomes paramount. Firms must perform thorough due diligence and benchmarking while holding a long-term view of business sustainability. By considering operational support, compliance oversight, and potential growth opportunities, smaller firms and advisers can chart a viable future amid rising pressures.

Conclusion: Navigating the New Market Divide

The divergence between DA firms and networks paints a complex picture for property owners and investors looking to navigate the future of the UK property market. Understanding these trends becomes critical in strategic planning and leveraging potential opportunities within the evolving regulatory landscape. Regular updates on these market movements are crucial for informed decision-making as businesses seek resilience in uncertain times.