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Financial services start-ups using interim managers to help win FSA approval

Financial services start-ups using interim managers to help win FSA approval 

Increased uncertainty since credit crunch

Increased uncertainty over regulatory approval means that financial services start-ups are making greater use of interim managers to help them win FSA approval, says Interim Partners, the leading provider of interim managers.

The FSA implemented a tougher regulation policy in response to the credit crunch which has increased uncertainty for new businesses seeking approval to start trading.  The new policy includes subjecting applications for regulatory approval to much greater scrutiny and rejecting those applications that fail to match today’s higher standards.

Whilst businesses need a core of full-time management staff before the FSA will provide a licence, start-ups now do not want to take on the increased financial risk that taking on a full quota of permanent staff now entails, so they are turning to interim managers instead.

Andrew McIntee, Director of Financial Services at Interim Partners, comments: “New financial services businesses are using interims because they now need to do an enormous amount of work to win FSA approval.”

“Having the key permanent personnel in place is vital to getting FSA authorisation to trade but interims can be used to help push through all the workload the FSA now requires.”

“Businesses also want to be ready to bring their offering to market as soon as they get FSA approval.  Having interim managers in place speeds up the lag time between winning approval and putting the product or service in to market.”

“Previously they might have taken on full-time staff because they were more confident about getting approval but now they are using interims instead.”

“Interim managers are a much more flexible option for start-ups than permanent staff because they can be put in place so quickly.  If the business fails to get a licence it does not have to bear the cost of an expensive permanent executive working out their notice period, which can be up to six months for senior managers.”

Struggle to attract talented permanent staff before FSA approval

Interim Partners points out that even start-ups willing to take on a full complement of permanent staff prior to approval can struggle to attract the best talent because of the uncertainty.

Andrew McIntee says: “A senior financial services manager sitting in a permanent job is going to be reluctant to move to a new business before the FSA has given their view on whether that business is ever going to trade.  They don’t want to quit their senior jobs for an uncertain future.  By using an interim manager, start-ups can access the same level of expertise and experience as the permanent staff they might struggle to attract.”

“Once the interim has helped to win FSA approval, the start-up will be better placed to attract its preferred permanent staff and it can always keep the interim for a handover period to make sure there is a smooth transition.”

Recovery in financial services fuelled by new start-ups

In the wake of the credit crunch, a spate of new financial services businesses have been set up to compete with established providers (see graph).  Existing companies are also expanding into new product areas to grow their business, which also requires FSA authorisation.

Andrew McIntee comments: “The credit crunch transformed the financial services sector, making it much more attractive to new entrants.  For example, in banking many lending products have gone from being very low margin to very high margin.”

“Entrepreneurs want to bring new businesses to the market to profit from demand for services that cannot be met because so much capacity was lost in the financial crisis.”

“Existing financial services providers have also been quick to identify gaps in the market created by the collapse or restructuring of their competitors.”

“We have placed interims who have spearheaded the approval process both for new financial services providers, including a start-up bank, and for high street names looking to diversify into new markets.”


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