The Financial Conduct Authority (FCA) was established to regulate financial conduct in the UK. As the name suggests, its primary role is to ensure that firms and individuals within its regulatory perimeter act in ways that protect consumers, maintain market integrity, and promote competition. But not all financial planners operate within this perimeter, and understanding the distinction is key to evaluating conduct risk.
Inside the Perimeter: Financial Planners Who Sell Products and Provide Advice
Financial planners who sell products and provide advice fall squarely within the FCA’s regulatory remit. This is intentional, as their activities carry inherent conduct risks:
- Sales-Driven Advice
When advice is tied to product sales, there’s a risk of conflicts of interest. For instance, recommending a product that benefits the adviser financially, even if it’s not the best fit for the client. - Regulatory Scrutiny
To mitigate these risks, the FCA enforces strict rules and standards. These firms must demonstrate suitability, transparency, and fairness in their recommendations. - Liability for Redress
If consumers suffer harm due to mis-selling or poor advice, firms within the perimeter are accountable and may face significant liabilities for redress.
Outside the Perimeter: Independent Financial Planners Who Don’t Sell Products
Independent financial planners who focus solely on generic advice, without selling products, operate outside the FCA’s regulatory perimeter. This distinction is deliberate and codified in the FCA’s rules, particularly PERG 8.26.2, which clarifies that generic advice and education do not constitute regulated activities.
- Lower Conduct Risk
Since these planners don’t sell products or manage investments, the risk of conflicts of interest and mis-selling is absent. Their advice centres on empowering clients to make informed decisions. - No Regulatory Overlap
Without the need to comply with the FCA’s complex rules for selling financial products, independent planners can focus entirely on education and general guidance. This provides clients with a clear, straightforward service without hidden agendas. - Empowerment Through Education
These planners often fill the so-called “advice gap” by offering financial education, enabling individuals to manage their own finances effectively without the cost or pressure of product-based advice. If clients want products they are referred to indepemdent surveys, such as those provided by the Consumer Association’s Which? Money.
Addressing the Consumer Sophistication Gap
Robin Powell’s article highlights that while the “advice gap”—the lack of access to affordable financial advice—is often discussed, the real issue lies in the “consumer sophistication gap.” This gap represents a widespread lack of financial knowledge that leaves many people unable to make informed decisions or evaluate the quality of advice they receive. Robin argues that better financial education is the key to empowering consumers, enabling them to navigate their finances confidently and identify trustworthy advisers when needed. He champions innovative solutions, like financial coaching and pay-as-you-go advice models, which make guidance more accessible to those on average incomes. The focus, Robin emphasises, should be on educating and equipping individuals, rather than merely expanding access to traditional, product-driven advice.
As Robin Powell highlights in his article, the real challenge lies in bridging the “consumer sophistication gap”—the knowledge gap that prevents people from confidently navigating financial decisions. I fully agree that this gap needs to be addressed through better financial education, not by simply increasing access to regulated advice.
However, I respectfully disagree with concerns that removing regulated activity introduces significant conduct risks or liabilities for redress. Decades of legal advice and regulatory analysis through countless mis-selling and poor advice scandals show that the FCA’s framework is designed to keep these risks within its perimeter. This ensures that liability for mis-selling and poor advice rests with those engaged in regulated activities—not with independent educators or planners operating outside the perimeter.
Why This Matters
For consumers, understanding the difference between regulated advisers and independent planners is empowering. If you value unbiased generic advice and prefer to manage your finances without the pressure of product sales, independent planners offer a transparent, cost-effective alternative.
For the industry, it’s a call to embrace education as a tool to close the consumer sophistication gap. By equipping individuals with knowledge and confidence, we can build a financial ecosystem that works for everyone—not just those with wealth or access to traditional advice.
A New Way Forward
The future of financial planning lies in empowering consumers, not just selling them products. Whether you’re a consumer seeking clarity or a professional looking to redefine your approach, the message is the same: knowledge is the key to transforming financial lives. Let’s focus on education, transparency, and trust—building a fairer, more inclusive financial landscape together.
Academy of Life Planning 