The FCA notes that it has become aware of some financial adviser firms whose business model was to delegate the entire regulated activity of providing advice to an unregulated third party. Specifically, the FCA found that 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 was done through an improper delegation of regulated advice to unauthorised firms or individuals associated with the underlying assets. The FCA notes that this model was operated by such third parties who purported to be the financial adviser firms themselves, and that 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 FCA reminds financial adviser that they remain responsible for all decisions, actions and potential harm resulting from regulated activities provided in their name and the associated liability for providing unsuitable advice. Delegating regulated advice to an unauthorised party will not mean that the firm can avoid liability or regulatory action for unsuitable advice.

The regulator made clear its enthusiasm for new business models, but emphasised that improper delegation of authorised activities may carry significant risks of poor consumer outcomes. It is therefore essential that financial advisers uphold their responsibilities as described in the FCA Handbook at all times, and maintain ownership of the advisory process between themselves and their client.

View Improper delegation of authorised activities – a notice for financial adviser firms and their advisers, 30 November 2015