DA advice market under pressure as networks consolidate gains

New data obtained from the FCA via a Freedom of Information (FOI) request by Network Consulting points to a quiet but significant structural shift in the advice market. Over the past five years, it is the directly authorised (DA) sector that has borne the brunt of change, while networks have proved comparatively resilient.

The FOI request examined the number of DA intermediary firms and advisers operating in the retail advice market across both wealth and mortgages, excluding firms categorised as networks. The picture that emerges is one of sustained contraction.

Between 2020 and 2025, the total number of DA retail advice firms operating in mortgages only, wealth only, or both fell by 17.2%—a net loss of 1,853 firms. The steepest decline came from firms operating across both wealth and mortgages, down 24.4% (957 firms). Wealth-only firms also saw a sharp reduction, falling 19.4% (1,054 firms).

Mortgage-only DA firms have been more resilient, growing by 11% (158 firms) over the same period. However, even this segment has retreated from a 2023 high of 1,640 firms, slipping by 55 firms (4%). Overall, all DA firms intermediating in mortgages have declined by 799 firms, or 15%, since 2020.

Adviser numbers: stability masking longer-term pressure

Adviser headcount data tells a more nuanced story, in part due to a one-off reporting change. Solo-regulated firms were not required to submit Directory Persons data until 31 March 2021, creating a sharp apparent increase in adviser numbers between 2020 and 2021. Network Consulting argues this reinforces a common misconception: most DA firms are small, solo-regulated businesses rather than large multi-adviser practices.

Since that reporting change, mortgage adviser numbers within the DA population have remained broadly stable, rising by around 2%—roughly 300 advisers—since 2021. Wealth adviser numbers, however, have moved in the opposite direction, falling by 1,333 advisers, a decline of 12.5% over the same period.

Ageing adviser demographics, retirements and a steady migration toward appointed representative (AR) status under networks sit behind those figures. That shift is reflected in a separate FOI response on DA application approvals. Between 2020 and 2024, approvals for new DA firms fell by 75%, suggesting a sharply reduced appetite for direct authorisation. Higher threshold conditions, the responsibilities introduced under Consumer Duty, and the ongoing regulatory demands of DA status are all likely contributors.

Networks hold their ground

While the DA market has steadily contracted, the network sector has remained stable—and in some areas has edged forward. Network Consulting’s league tables for the top 30 networks with mortgage advisers show marginal growth across the AR market.

Across those networks, AR firm numbers increased by 0.03% and adviser headcount grew by 1.7% over the period measured. This was despite the high-profile exit of Tenet Group and the removal of two smaller networks from the tables after they fell below the 20-firm threshold. Those exits accounted for 34 firms and 120 advisers, yet aggregate numbers still showed modest growth.

For many advisers, that stability is becoming an increasingly attractive proposition.

“Turnover and profitability increase” for DAs going AR

Ahmed Bawa, CEO at Rosemount Financial Solutions (IFA) Limited, says growing regulatory and operational pressures are pushing more DAs toward the AR model.

“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,” he said.

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

For Bawa, the challenge now sits with networks themselves.

“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,” he added. “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.”

“It should be a positive step towards something”

Haydn Thomas, CEO at Cornerstone Finance Group, frames the DA versus AR decision as a strategic one rather than a defensive move.

“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,” he said.

“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.”

What does this mean for customers?

The contraction of the DA market naturally raises questions about customer outcomes and potential concentration risk. Paul Day, founder and director at Network Consulting Services, does not believe the shift will materially disadvantage mortgage customers under the current regulatory framework.

“I don't believe this will have any profound consequences, DA firms will always be around (if the regulatory landscape remains as it is) and DA is the right route for many firms for their businesses,” he told Mortgage Introducer.

“Many networks offer whole of market propositions both in lending and protection so client outcome wouldn’t be compromised if the adviser was within a network. There is increased commentary regarding loaded protection premiums offered by some networks but there are also DAs that opt for loaded premium models, however this is a different story altogether. I do believe the number of DA firms will reduce further over coming years but I feel it will reach a level and remain stable.”

On concerns that adviser numbers could become concentrated within a small number of large networks, Day is unconvinced.

“No, I don’t think network offerings will contract to a small number and create a concentrated risk,” he said. “Consolidation of networks is possible but equally, there are smaller networks being set up, there were some last year and there will be more this year too.”

Specialist advice, AI and the next phase

While some have suggested that more complex or specialist lending areas could accelerate the shift from DA to AR, Day believes technology—particularly AI—will be the more decisive factor in shaping the next phase of the market.

“Unless advisers embrace the use of AI in their processes then they will be left behind,” he said. “With that in mind, I do think that specialist lending areas will become more of a focus for all advisers but I can’t see this having an influence on whether a firm goes DA or to a network. That said, if a network is overly prescriptive regarding specialist areas it will cause firms to consider whether that principal is the right one for them.”

A strategic crossroads

Taken together, the FOI data and market commentary point to a sector at a strategic crossroads. Direct authorisation remains the right route for some firms, but rising regulatory expectations and declining new DA applications suggest it will increasingly be the exception rather than the norm. Networks, by contrast, have positioned themselves as a stable platform, offering scale, support and evolving technology propositions.

For firms weighing their options, the decision is becoming less ideological and more commercial: which model offers the most sustainable balance of control, support and long-term resilience?

What is clear is that the balance between DA and network models is shifting. How advisers—and their customers—benefit from that shift will be one of the defining questions for 2026 and beyond.