FCA warns advisers on risks of outsourcing advice

Some financial adviser firms and associated individuals have been referred to the FCA's Enforcement Division after delegating the entire regulated activity of providing advice to an unregulated third party.
 
Retail consumers had been recommended to switch their mainstream personal pensions into SIPPs with underlying high risk assets that may have been unsuitable for the customer. This had been done through an improper delegation of regulated advice to unauthorised firms or individuals associated with the underlying assets. This model was operated by these parties while purporting to be the financial adviser firms. The authorised financial adviser firms did not personally contact customers or review whether the recommendations were suitable before they were sent out, despite being responsible for the advice provided.

The regulator is reminding advisers that it is essential to uphold their responsibilities and maintain ownership of the advisory process between themselves and their client.

In a statement, the FCA said:

"Delegating regulated advice to an unauthorised party will not mean that the firm can avoid liability or regulatory action for unsuitable advice. If approached in regard to this type of activity, we urge authorised firms to consider the significant implications that entering into this type of arrangement could have on their professional reputation and future livelihood.

"If you are approached and you take on business in this way, it may create a significant risk to your business model and may affect your professional indemnity insurance. We know firms will be mindful of principle 11, and we would encourage firms to contact us if they are approached by entities with a view to entering into the sort of arrangements described in this notice."