By the end of last year the wait time has risen to almost five months, up from 10 weeks at the start of 2013.
The figures were compiled by law firm RPC, and have been confirmed by the FCA.
RPC said the additional time taken by the FCA for theses approvals is most likely as a result of greater scrutiny by the regulator of firms’ business plans and resourcing before giving its approval for firms’ new offerings.
The FCA said the average processing time is influenced by the complexity of the application, the completeness and quality of the information provided by the applicant, and the time the applicant takes to send the regulator any necessary information not provided in the original application.
Financial services businesses wanting to expand into a different business lines must apply to the FCA for a ‘variation of permission’, allowing it to engage in new regulated activities.
RPC said that under the Financial Services Authority in 2007 these types of approvals took little more than a month, but the current regulatory regime is much more stringent as the FCA seeks to prevent failures.
Advice firm failures cost the industry hundreds of millions of pounds as claims against the collapsed firms fall on the Financial Services Compensation Scheme (FSCS), to be paid for in the form of levies on all regulated advisers.
The FCA has said it has opted to become more intrusive and pre-emptive than its predecessor the FCA, to prevent failures happening in the first place.
But expanding firms are finding it increasingly difficult to comply with the regulator’s requirements, according to RPC.
The major fault lines tend to relate to how much excess capital the FCA wants assigned to the new business line and the number of staff that new business line should have, RPC said.
Where firms choose to set up new service line companies through subsidiaries, the FCA tends to demand high levels of capitalisation to insulate customers against potential losses.
Another area of friction with the regulator is the higher number of operational and compliance staff required in order to meet the regulator’s expectations – with obvious cost implications for the business.
Richard Burger, partner at RPC said: “Starting in new business lines carries an inherent risk, which is a positive thing for the long term health of the market.
“This cannot be entirely regulated away. When the costs of obtaining permissions begin to become prohibitive consumer choice is likely to be damaged.”