Compliance Officer and MLRO for Brokers and Small Advice Firms
Small brokers and financial advice firms make up a large share of the firms that need compliance oversight (SMF16) and money laundering reporting (SMF17) covered. Many are owner-managed, with a handful of advisers or brokers and a lean back office. Their regulatory obligations are real, but their budgets are tight, and the person who holds the two Senior Manager Functions is often the most important appointment they make. This guide covers how these firms usually fill the roles, what experience matters in each part of the market, and the points that come up most often when we recruit for them.
Which Firms This Covers
This guide is written for small, directly authorised firms within the Senior Managers and Certification Regime, including:
- independent financial advisers and small wealth planning firms;
- mortgage brokers and protection advisers;
- general insurance brokers, both personal lines and commercial;
- small investment and stockbroking firms; and
- institutional and wholesale brokers.
Most are Core firms under the SMCR. That means the core Senior Manager Functions apply, including SMF16 and SMF17 for firms within scope of the Money Laundering Regulations. Our guide to which SMFs apply at which firm tier explains the detail. Some general insurance intermediaries are outside the scope of the Money Laundering Regulations and don’t need an MLRO in the same way, so check your own position before recruiting.
One Person or Two?
For most small brokers and advice firms, one experienced person holding both SMF16 and SMF17 is the natural structure. The conduct risk is real but manageable, the financial crime risk is usually moderate, and the volumes rarely justify two senior appointments. The FCA accepts combined appointments where the individual is competent in both functions and has enough time to do both properly.
The combined role works less well where the firm has significant international business, higher-risk clients, a large appointed representative network, or rapid growth. In those cases, separate appointments, or a combined holder with a deputy, are usually needed. Our page on combined compliance officer and MLRO recruitment sets out a practical test for deciding.
What Experience Matters by Type of Firm
The single biggest predictor of success in these roles is sector experience. A compliance officer who knows mortgage advice won’t automatically know institutional broking, and the reverse is just as true.
| Type of firm | Compliance priorities | Financial crime priorities |
|---|---|---|
| IFAs and wealth planners | Suitability, file reviews, ongoing advice and fees, Consumer Duty and fair value, vulnerable clients | Source of wealth, politically exposed persons, investment-related fraud |
| Mortgage and protection advisers | Affordability and suitability, adviser oversight, vulnerable customers, Consumer Duty outcomes | Mortgage fraud, source of deposit, introducer risk |
| General insurance brokers | Product governance, fair value, claims handling, complaints | Premium payment patterns, sanctions on international risks (where in scope) |
| Investment and stockbrokers | Appropriateness, best execution, financial promotions, client money | Onboarding, source of wealth, market abuse alongside AML |
| Institutional and wholesale brokers | Market conduct, conflicts, client categorisation, record-keeping | Counterparty due diligence, sanctions, cross-border flows |
When we recruit for these firms, we prioritise candidates who have worked in the same type of business. Our guide to the experience that matters by firm type goes into more detail.
Fractional Is the Norm, Not the Exception
Most small brokers and advice firms don’t need a full-time compliance officer and MLRO. A fractional arrangement, typically half a day to two days a week, gives them access to someone with far more experience than they could afford full-time. It’s an established model in this part of the market, and the regulator accepts it, provided the time commitment is realistic and the firm can show how urgent matters, such as suspicious activity decisions, are handled on days the person isn’t working.
| Firm | Typical fractional time |
|---|---|
| Small IFA or mortgage firm, simple products, UK clients | Half a day to one day a week, often with outsourced file checks |
| Wealth planner with higher-value clients | One to two days a week |
| Small investment or stockbroker | One to two days a week |
| Institutional broker with international counterparties | Two days a week or more, sometimes with a separate MLRO |
Our guides to sizing a fractional role and what a combined compliance officer and MLRO costs help firms budget. For firms that want only the compliance side covered part-time, our page on part-time compliance officers for small firms covers the options.
Leaving a Network for Direct Authorisation
A common trigger for these appointments is a firm leaving a network to become directly authorised. As an appointed representative, the firm relied on its principal’s compliance and financial crime arrangements, and the principal held the Senior Manager Functions. Once directly authorised, the firm needs its own approved compliance officer and MLRO, its own policies and monitoring, and its own reporting to the FCA.
Firms making the move often underestimate two things: how much work the compliance framework involves, and how long it takes to recruit and approve the right person. The application itself will name the people who will hold the Senior Manager Functions, so the search should start well before the application is submitted. Our guide to going directly authorised sets out the full list of appointments, and the FCA’s guidance on appointed representatives and principals explains the regulatory position.
Firms With Their Own Appointed Representatives
The reverse situation matters too. Brokers and advice firms that act as principals for their own appointed representatives take on significant oversight responsibilities. The FCA has tightened its expectations of principals in recent years, and that oversight falls mainly on the compliance officer. A firm with a growing AR network may find that the compliance side outgrows a combined role well before the financial crime side does. Our guide to appointed representatives covers the regime.
Scenario: A small investment broker, directly authorised for many years, loses its long-serving compliance officer and MLRO to retirement. The firm has eight staff and a stable, mainly UK client base, and needs one person to hold both functions for one day a week. The first candidates it speaks to have strong compliance backgrounds from large insurers but no hands-on financial crime experience. It refocuses the search on people who have held both functions at comparable brokers, and appoints a fractional holder who already covers two similar firms, with remote availability for urgent decisions on other days.
Common Pitfalls
- appointing a director or senior adviser to SMF16 because “someone has to”, without the experience or independence the role needs
- naming an MLRO who has never made a suspicious activity decision
- agreeing a fractional time commitment that suits the budget rather than the firm’s risks
- paying the compliance officer in a way linked to sales, which undermines independence
- having no cover for SAR decisions when the holder is away
- leaving the search until the current holder has resigned, which usually forces a rushed appointment
If the firm has already lost its holder, our guide to what to do when your MLRO resigns sets out the first steps, and interim cover can bridge the gap.
How We Recruit for Brokers and Advice Firms
We start with the firm’s business: what it advises on or arranges, its clients, its distribution, its volumes and its plans. That tells us whether a combined role works, how much time it needs and which sector experience matters most. We then approach approved individuals and experienced deputies who have worked in the same part of the market, test both the compliance and financial crime sides, and check approvability before the shortlist goes to the client. For firms where a full-time appointment makes sense, we recruit a permanent compliance officer or MLRO instead. Our page on SMF recruitment for wealth managers and advice firms covers that sector more broadly.
Compliance and MLRO Recruitment for Smaller Firms
Sector experience, realistic time. Every SMF search is led personally by Adrian Lawrence FCA
Combined Role
One person for both functions.
→ Joint SMF16 and SMF17 → What it costsWho can hold the roles? →
Part-Time
Fractional senior cover.
→ Part-time compliance officer → Fractional MLROSizing the role →
Sectors
Advice, wealth and investment.
→ Wealth and advice firms → Investment managersRDR-qualified Senior Managers →
Authorisation
Going directly authorised.
→ SMF authorisation support → Interim coverGoing directly authorised →
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
Can a director of a small broker be its compliance officer?
It’s possible if they have the experience and can act independently, but many firms find it hard to show that a director who also sells or advises is sufficiently independent. An external, fractional holder is often a stronger answer.
Do insurance brokers need an MLRO?
It depends on the business. General insurance intermediation is largely outside the Money Laundering Regulations, while life and investment-linked business is within scope. Check your firm’s position before recruiting.
How quickly can a fractional compliance officer and MLRO start?
Fractional candidates often have shorter notice periods than employees, but FCA approval is still needed before they perform the functions.
Can we share a compliance officer with another firm?
Fractional holders routinely serve several firms. What matters is that each firm has enough of their time and that conflicts are managed.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He leads every SMF Capital search personally. View Adrian’s ICAEW profile.
Need a Compliance Officer and MLRO?
Tell us about your broking or advice firm. We’ll find an experienced, approvable compliance officer and MLRO from your part of the market, full-time or fractional. We’ll come back to you the same working day.
Adrian Lawrence FCA is the founder of SMF Capital and a Fellow of the Institute of Chartered Accountants in England and Wales and holds an ICAEW practising certificate in his own name. He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience working with boards, investors and business owners across the UK. He founded SMF Capital to help FCA and PRA-regulated firms appoint the Senior Managers the regulators expect, with the fit and proper assessment built into every search, and personally leads every Senior Manager Function search.