The Timebank: Dear Regulator…is it time for change in the treatment of regulated vs unregulated products? 

by | May 7, 2024

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With their take on the occasional ‘Dear CEO’ letter that comes out of the FCA, The Timebank shares their latest instalment to the range of ‘Dear Regulator’ letters that represent just some of the thoughts and ideas on the direction of travel the industry might like to see the regulator heading in.

In his letter to the regulator this month, The Timebank’s Damian Davies points out inconsistencies between unregulated and regulated products and how a clear firebreak in advice on such products can be of benefit to all. 

Dear Regulator, 

Financial advice and planning is evolving into a profession.  This is down to both push factors from those inside wanting to get away from an historic tarnished image of sales, and a pull factor from the changing regulatory landscape led by the FSA and FCA.

This has to be a good thing for both consumers and those within the profession and brings with it certain responsibilities.  At the same time, we might be overlooking some expectations that those outside of the profession might have, especially those who might become clients of the profession.


Learning from others

We are worried that some of these expectations clash with an inconsistency in this development into a profession that can be highlighted when looking at, by way of comparison, the medical profession.

When a person goes to see a Doctor they have confidence that the Doctor will have the appropriate training and qualifications and that the medicines and treatments they prescribe have been approved, tested and regulated.  


It would be hard to imagine, then, an NHS doctor recommending an unregulated medicine or a medicine from a non-regulated manufacturer.  

If that happened, and the unregulated medicine or non-regulated manufacturer was responsible for serious patient harm, the NHS would be responsible and pay out compensation based upon the fact the doctor was working for the NHS, despite the individual doctor having full knowledge the Medicine was not approved.     

Some home truths


This conflict, however, exists in financial advice, where unregulated products are promoted alongside regulated products.  Despite disclosing the status, it is up to the consumer to work out the differences and this must cause confusion or, at worst, mistrust.     

So, what can we do to remove the blurred lines between regulated and unregulated products and advice in our profession?

This is an opportune time to consider this as the rise of ‘influencer’ advisers, who are not regulated, poses a significant risk on the reputation of the regulated profession.


What are the implications that regulated advice should mean 100% regulated advice from a regulated adviser working in a regulated business who is only recommending regulated products, all of which comply with the high standards that are part of being regulated?

In a fully regulated world, the consumer would be safe in the knowledge they will get a professional service which, if it fails, is backed up by the protection offered by Financial Services Compensation Scheme and the Financial Ombudsman service.    

But would it work?


We can see this working, as for many advisers this proposal would have little or no impact on their current operations. That’s because, in our experience, many treat the recommendation of non-regulated products as seriously as regulated products. 

  • For Protection, where many products are not regulated currently, these will also be recommended by regulated individuals.  The impact of bringing such activity back to regulated advisers only should have a positive effect.  And advice processes could ensure access to this important aspect of financial planning can be maintained.  The biggest impact here will be unregulated brokers specialising in this market.  Bringing them into a regulated ecosystem will give consumers greater security.
  • For SIPPs, the main issue is the treatment of Commercial Property purchases and specialist investments in SIPPs.   Bringing this area under the remit of regulated advice should be welcome, as inappropriate assets in SIPPS are a worrying potential for complaints.  Alternatively, excluding any SIPP that has non-standard assets from a regulated world will ringfence the risk away.
  • Finally, many of the issues around unregulated investments were due to European Law as there was an inability to discriminate against funds regulated by other European countries.  This is no longer an issue so a logical solution would be to state that all Investments should be regulated by either the FCA or a regulator whose standards are equal or exceed those of the FCA.

This would remove one weapon from scammers, as the regulator would be able to offer investors absolute assurance the product they are looking at, or the advice they have received, is from an appropriate source.   

The counter argument could be that this would restrict the advice clients could access and raise the costs due to the need to gain approval from the FCA.  


People will still have the freedom to sell or buy an unregulated product, but being unregulated means it is very much up to the buyer and seller to know that doing so carries with it an understanding that the product is outside of the regulations for a reason.  Only the most appropriate investors will therefore be making those decisions.

Advisers can have separate, unregulated parts to their business if they specialise in unregulated products.  A clear firebreak between the regulated firm and non-regulated firm removes the risk of cross contamination.  

The most important aspect of this change is ensuring the people paying for the cost of unregulated advice and investments are the ones who pay when it goes wrong and not the clients and advisers who follow the rules and ensure that the products they offer are suitable. 


We look forward to working together to promote good consumer outcomes.

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