Fractional or Full-Time Compliance Officer? A Cost and Risk Comparison
For many smaller FCA-regulated firms, the compliance oversight function is the most important hire they’ll make, and one of the most expensive. A full-time compliance officer at Senior Manager level is a significant cost for a firm with a handful of staff. A fractional compliance officer, working a set number of days a month, can cost a fraction of that. But cheaper isn’t always better, and the regulator will look closely at whether the arrangement actually works.
This post compares the two on cost, risk and fit, so firms can make the decision with the numbers in front of them.
The Three Options
- Full-time compliance officer: an employee holding the SMF16 Compliance Oversight function, working for the firm alone.
- Fractional compliance officer: an experienced individual, often self-employed, approved to hold SMF16 at the firm and working a set number of days a month, sometimes for several firms.
- Outsourced compliance support: a consultancy providing monitoring, advice and documentation. It can support the function, but the consultancy itself doesn’t hold SMF16. An approved individual still has to.
Many smaller firms combine the second and third: a fractional SMF16 holder supported by outsourced monitoring. Our compliance officer recruitment page covers the role itself.
The Cost Comparison
| Full-time SMF16 | Fractional SMF16 | |
|---|---|---|
| Typical base cost | £85,000–£140,000 salary at smaller firms | £650–£1,000 per day |
| Employer costs | Typically 20–30% on top (employer NI, pension, benefits) | None; the individual covers their own |
| Typical annual total | £105,000–£180,000 | £40,000–£90,000 at 2–6 days a month |
| Recruitment | Search fee; notice periods of 1–3 months | Usually quicker; many fractional holders are available sooner |
| Flexibility | Fixed cost | Days can scale up or down |
| Holiday and absence cover | Needs planning | Needs planning, especially if the individual serves several firms |
Figures are indicative and drawn from our SMF and compliance salary guide. The gap is clear: for a small firm, a fractional arrangement can cost less than half as much as a full-time employee.
The Risk Comparison
Cost is only half the decision. The FCA expects the compliance oversight holder to have enough time, knowledge and authority to do the job properly. The question isn’t whether the role is full-time, but whether it is adequate for the firm.
| Risk | Full-time | Fractional |
|---|---|---|
| Enough time for the firm’s needs | Usually yes | Depends on days agreed and other commitments |
| Knowledge of the business | Builds quickly through daily involvement | Takes longer; relies on good information |
| Availability for urgent issues | High | Needs a clear agreement on response times |
| Independence from the business | Can be harder for an employee | Often strong; less dependent on one employer |
| Breadth of experience | One firm’s view | Often broad, from working across several firms |
| Regulator’s view | Straightforward | Will ask about time, other roles and access |
When Fractional Works Well
- Small firms with simple business models and limited regulated activity, such as smaller advice firms, brokers and boutique investment managers.
- Firms with a capable compliance administrator or analyst who handles day-to-day work, supervised by the fractional SMF16 holder.
- Firms that need senior expertise they couldn’t otherwise afford, such as an experienced compliance officer who previously worked at larger firms.
- Firms between stages, for example after authorisation and before growth justifies a full-time hire.
Our article on when interim and fractional SMF appointments work explores this further.
When Full-Time Is the Better Answer
- Firms with high volumes of regulated activity, complex products or many customers.
- Firms under supervisory attention, remediation or a skilled person review.
- Firms growing quickly, where compliance needs to be involved in daily decisions.
- Firms where the compliance officer also needs to lead a team.
- Enhanced firms and dual-regulated firms, where the role’s scope usually demands full-time focus.
A small advice firm uses a fractional compliance officer two days a month, supported by outsourced file checking. It works well for three years. When the firm acquires two smaller practices and doubles its adviser numbers, the fractional holder flags that two days is no longer enough. The firm increases the time to six days a month for the integration, then recruits a full-time compliance officer, with the fractional holder providing a handover.
Making a Fractional Arrangement Work
Fractional SMF16 checklist
- Agree a realistic number of days, based on the firm’s activity rather than budget alone
- Confirm the individual’s other SMF and fractional roles, and how conflicts are managed
- Agree response times for urgent matters
- Give direct access to the board, systems and management information
- Define what the fractional holder does and what others in the firm do
- Put a written engagement in place that matches the Statement of Responsibilities
- Review the time commitment at least annually and after significant change
- Plan holiday and absence cover
The regulator will want to see that the arrangement is adequate, so the approval application should explain the time commitment, other roles and support available.
Outsourced Support Is Not a Substitute
A common mistake is to assume that an outsourced compliance consultancy covers the compliance oversight function. It can provide valuable monitoring, policies and advice, but it can’t hold SMF16 as a firm. The function must be held by an approved individual, who remains accountable even if much of the work is done by others. Some consultancies can provide an approved individual as a fractional SMF16 holder, which is a different arrangement and needs to be set up as one.
Combining Compliance and MLRO
At many smaller firms, the same person holds both compliance oversight and the MLRO function, whether full-time or fractional. That can be efficient, but it increases the time needed and the importance of availability, because suspicious activity reporting can’t wait for the next scheduled day. If you’re combining the roles in a fractional arrangement, agree how urgent internal reports will be handled. See our MLRO recruitment page.
The Decision in Practice
For most small firms, the right answer depends on three questions: how much regulated activity the firm carries out, how quickly it’s growing, and whether there’s someone in the firm to handle day-to-day compliance work. If activity is limited, growth steady and there’s support in place, a fractional arrangement is often the better choice on both cost and expertise. If activity is high, growth rapid or the firm is under supervisory attention, a full-time compliance officer is usually worth the extra cost.
Whichever you choose, write down the reasoning and review it each year, because the board and the regulator may ask why the arrangement was considered adequate. It also isn’t a permanent choice. Many firms start fractional and move to full-time as they grow, and some larger firms use a fractional specialist alongside a full-time team for particular areas.
Compliance Officer Options
Services and guides for firms choosing between fractional and full-time compliance oversight. Every SMF search is led personally by Adrian Lawrence FCA
Recruitment
Permanent, interim and fractional SMF16.
→ Compliance officer (SMF16)
→ Fractional and interim cover
Costs
Salaries and day rates.
→ SMF and compliance salary guide
→ MLRO recruitment (SMF17)
Getting Approved
Approval for a fractional holder.
→ The fit and proper test
→ SMF appointment timeline
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
Does the FCA accept fractional compliance officers?
Yes, provided the arrangement is adequate for the firm: enough time, the right expertise, clear access to the business and good availability for urgent matters.
How many days a month does a fractional compliance officer need?
It depends on the firm. Small, simple firms may need two to four days a month; more active firms may need one or two days a week.
Can a compliance consultancy hold SMF16?
No. SMF16 must be held by an approved individual. A consultancy can provide a fractional individual or support the function, but the individual holds the function.
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, including fractional and full-time compliance officer appointments for smaller FCA firms. View Adrian’s ICAEW profile.
Deciding Between Fractional and Full-Time?
Tell us about your firm and we’ll give you an honest view of what level of compliance oversight it needs, and what it will cost.
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.
