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Personal Financial Planning: Traffic light guide to regulation

Personal Financial Planning is an area in which Chartered Accountants are able to use their skills and experience to offer a range of services beyond the traditional business arena, advising on issues such as estate planning, insurance and pensions and investments.

Traffic light quick navigation guide to regulation considerations

To help members navigate this sometimes complex regulatory area we have produced this 'Traffic Light' guide to signpost practitioners in the advice they can offer when holding a Practice Certificate, a Designated Professional Body (DPB) Licence or are operating under FCA regulation.

If you would like to receive a printed version of this guide please contact practice@icaew.com.

Accumulation: Pensions

 
Not regulated
  • Factual discussions at a general level with a client about the tax treatment of pensions and general information on the different types of pension schemes that can be used, but not discussions on the merits or suitability of specific pension products. For example, a discussion on the generic differences between stakeholder pension plans as opposed to a self-invested personal pension schemes, with general comments about their characteristics while refraining from discussing or identifying any specific pension product.
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing clients details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
 
Regulated but can be done with a DPB licence
  • Passing clients details to an appropriately authorised firm with the clients consent for the adviser to contact the client.
  • Explaining and evaluating advice given by an appropriately authorised firm and identifying whether this is suitable or not but not giving alternative advice.
  • Implementing investment planning in cooperation with an appropriately authorised firm.
  • Arranging to make payments into, or to place property into, a personal pension scheme, including a self -invested pension scheme at the request of a client, but not recommending the acquisition of any rights in such a scheme.
 
Regulated and requires FCA authorisation
  • Discussions with a client on the relative merits and suitability of a specific pension contract eg, a particular self-invested personal pension offered by company X.
  • Recommending that a client purchases a specific personal pension contract.
  • Advising a client to invest money or put property into a specific pension product.

Accumulation: Portfolio Management

 
Not regulated
  • Managing investments under a power of attorney and providing all routine day-to-day decisions relating to investments (excluding all types of insurance contract such as general, life assurance, pensions, term assurance) are taken on behalf of the firm by an appropriately authorised firm.
  • Acting as a trustee and personal representative provided the person acting as a trustee does not hold themself out as being able to manage investments and is not remunerated for what they do in addition to any remuneration they receive as trustee or personal representative (excluding all types of insurance contract such as general, life assurance, pensions, term assurance).
 
Regulated but can be done with a DPB licence
Decisions:
  • to sell or not to sell existing investments where, for example, this would result in a reduced tax liability;
  • concerning investment strategy eg, for tax planning purposes;
  • to appoint or remove an external fund manager; or
  • that do not concern the acquisition of a particular security or contractually based investment (eg, life policies, investment linked long-term health insurance).
 
Regulated and requires FCA authorisation
  • Discretionary management of investments.
  • Making any financial promotion, such as informing a client about specific tax efficient schemes that may involve regulated products or activities, unless there is a specific exclusion in the Financial Promotions Order.

Accumulation – ISAs, bonds and unit trusts

 
Not regulated
  • Factual discussion at a general level with a client about the different types of investments, such as explaining the differences between unit trusts and ISAs but not discussions on the merits of a specific investment.
  • Passing client’s details to an appropriately authorised firm with the client's consent for the firm to contact the client. A suitable firm is one that is either independent, places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market that is most suitable for the client's needs.
  • The giving of advice by a trustee or personal representative, where they give this to a fellow trustee or personal representative or to a beneficiary under the trust, will or intestacy concerning their interest in the trust fund or estate, provided no remuneration is received over and above that for services as a trustee.
  • Arranging deals in investments provided the arrangements are made by a person acting as a trustee or personal representative to be entered into in their capacity as such or by a beneficiary under the trust, will or intestacy provided no remuneration is received over and above that for services as a trustee. 
 
Regulated but can be done with a DPB licence 
  • Explaining and evaluating advice given by an appropriately authorised firm and identifying whether this is suitable or not, but not providing alternative advice.
  • On the instruction of a client, arrange with an authorised firm the buying or subscribing for these types of investments.
  • Implementing an investment plan in cooperation with an appropriately authorised firm
 
Regulated and requires FCA authorisation 
  • Discussions with clients on the relative merits and suitability of a specific investment offered by company X.
  • Recommending that a client purchase a specific investment. 

De-cumulation – Pensions

 
Not regulated 
  • Discussions with a client on the different ways to access their pension, or passing this on to someone else as part of inheritance tax planning.
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing the client’s details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
 
Regulated but can be done with a DPB licence
  • Passing client’s details to an appropriately authorised firm with the client’s consent for the adviser to firm the client.
  • Explaining and evaluating advice given by an appropriately authorised firm and identifying whether this is suitable or not.
  • Implementing investment planning in co-operation with an appropriately authorised firm.
  • On the advice of an appropriately authorised firm to a client, dispose of some or all of the rights under a personal pension scheme to provide funds for other purposes.
 
Regulated and requires FCA authorisation
  • Discussions with, or making a recommendation to, a client about the disposal of any rights or interests in a personal pension scheme. 

De-cumulation: ISAs, bonds and unit trusts

 
Not regulated
  • Passing client’s details to an appropriately authorised firm with the client's consent for the firm to contact the client. A suitable firm is one that is either independent, places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
  • The giving of advice by a trustee or personal representative where they give this to a fellow trustee or personal representative or to a beneficiary under the trust, will or intestacy concerning their interest in the trust fund or estate provided no remuneration is received over and above that for services as a trustee.
  • Passing a client’s details to an appropriately authorised firm with the client’s consent for the adviser to contact the client.
  • Arranging deals in investments, provided the arrangements are made by a person acting as a trustee or personal representative to be entered into in their capacity as such or by a beneficiary under the trust, will or intestacy.
 
Regulated but can be done with a DPB licence
  • Providing the client with advice which leads to the disposal of an investment. For example, in the course of tax advice or tax planning, the selection of realisable investments that have unrealised capital gains that give rise to opportunities equivalent to a ‘bed and breakfast’ type arrangement.
  • On the instruction of a client, arrange with an appropriately authorised firm the selling of these types of investments. Please see the DPB handbook for other referral considerations.
  • Implementing an investment plan in cooperation with an appropriately authorised firm.
  • Explaining and evaluating advice given by an appropriately authorised firm, identifying whether this is suitable or not and providing alternative advice.
 
Regulated and requires FCA authorisation
  • There are no additional investment activities which specifically require FCA authorisation, provided a licenced firm’s regulated activities can reasonably be regarded as incidental and complementary to its professional services.

Personal Protection

Non-investment insurance contracts (Fee protection insurance, key man cover, private health insurance, private medical insurance, term policies etc)

 
Not regulated 
  • Factual discussions with a client about the need for insurance generally and the type of insurance product (key man, fee protection, medical insurance etc) that would be most appropriate, but not discussions on the merits or suitability of specific insurance products. For example, a factual discussion on the generic differences between private health insurance and private medical insurance or a suggestion that a client take out business interruption insurance, while refraining from discussing or identifying any specific product.
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing client’s details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
  • Providing information to clients about claims and assisting an insurer in the administration and performance of claims handling.
 
Regulated but can be done with a DPB licence
  • Discussions with clients on the relative merits and suitability of a specific pure protection insurance contract such as key man or fee protection.
  • Recommending that a client purchase a particular pure protection insurance contract.
  • Explaining and evaluating advice given by an appropriately authorised firm and offering alternatives where the advice is identified as unsuitable.
  • Participating in insurance planning in cooperation with an appropriately authorised firm.
  • On the client’s instructions, arrange with an appropriately authorised firm the buying, subscribing for or underwriting of a particular insurance contract. This includes completing a proposal form for a client and/or sending the proposal form to an insurance broker or insurance company.
  • Introducing a client to an authorised firm by passing a client’s contact details to that firm to contact the client.
  • Help a client in the administration and performance of a particular insurance contract by assisting in the completion of the claim form or notifying the claim on behalf of a client, or negotiating with the insurer on behalf of the client.
 
Regulated and requires FCA authorisation
  • There are no additional investment activities relating to pure protection insurance policies for which FCA authorisation is required. This is provided any recommendation to purchase a pure protection policy by a licensed firm can reasonably be regarded as incidental and complementary to its professional services.

Corporate Finance

 
Not regulated
  • Advising and arranging the formation of a company, provided no advice is given to a prospective purchaser of shares.
  • Providing a share valuation for a client, provided no advice is given about whether to sell or purchase the shares.
  • Advice and assistance to a company to issue shares, provided this does not result in bringing the company and potential investors together. Please see part 3, scheme 5 of the DPB handbook for more details on this exemption.
  • Advising and arranging the sale or purchase of a company (listed or unlisted), provided this meets the corporate exclusion in the Financial Services & Markets Act 2000 (see RAO Article 70 of the Regulated Activities Order) (ie, the object of the transaction may reasonably be regarded as the acquisition of day-to-day control over the affairs of the company or the shares (together with the ones already held) being sold or acquired amount to 50% or more of the voting rights and the transaction is between two parties, each of which is a body corporate, a partnership, a single individual or a group of connected individuals).
 
Regulated but can be done with a DPB licence 
  • Discussions with clients on the relative merits of the sale or purchase of unlisted shares and the sale of listed shares.
  • Recommending the sale or purchase of unlisted shares and the sale of listed shares.
  • Arranging for the sale or purchase of unlisted and listed shares.
  • Arranging equity for debt exchange for a company with financial problems to increase stability.
  • Explaining and evaluating advice given by an authorised firm and, if unsuitable, offering alternative advice but only in relation to unlisted shares.
 
Regulated and requires FCA authorisation
  • Discussions with clients on the relative merits of the purchase of listed shares.
  • Recommending the purchase of listed shares and carrying out the transaction.
  • Any activity that involves a financial promotion, such as the issue of a public document, unless there is a specific exclusion in the Financial Promotions Order.

Estate Planning: Pension

 
Not regulated
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing client’s details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
  • Factual discussions with a client about passing their pension onto someone else as part of inheritance tax planning.
 
Regulated but can be done with a DPB licence 
  • On the instruction of a client, arrange with an appropriately authorised firm to dispose of some or all of the rights under a personal pension scheme.
  • Passing a client’s details to an appropriately authorised firm with the client’s consent for the firm to contact the client.
  • Explaining and evaluating advice given by an appropriately authorised firm and identifying whether this is suitable or not.
  • Implementing investment planning in co-operation with an appropriately authorised firm.
 
Regulated and requires FCA authorisation
  • Discussions with, or making a recommendation to, a client about the disposal of any rights or interests in a personal pension scheme and carrying out the transaction.

Estate Planning: Term insurance

 
Not regulated
  • Factual discussions at a general level with a client about investments such as term assurance, whole of life insurance, insurance bonds etc, which can be used for tax planning purposes.
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing the client’s details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
  • Providing information to clients about claims and assisting an insurer in the administration and performance of claims handling.
 
Regulated but can be done with a DPB licence 
  • Discussions with clients on the relative merits and suitability of a specific term insurance contract.
  • Recommending that a client purchase a particular pure protection insurance contract and executing the transaction.
  • Explaining and evaluating advice given by an authorised firm and offering alternatives where the advice provided is identified as unsuitable. Please see the DPB handbook for other referral considerations.
  • Participating in insurance planning in cooperation with an appropriately authorised firm.
  • On the client’s instructions, arrange with an appropriately authorised firm the buying, selling, subscribing for or underwriting of a particular insurance contract. This includes completing a proposal form for a client and/or sending the proposal form to an insurance broker or insurance company.
  • Introducing a client to an appropriately authorised firm by passing a client’s contact details to that firm for it to contact the client.
 
Regulated and requires FCA authorisation
  • There are no other investment activities relating to pure protection insurance policies for which FCA authorisation is required. This is provided any recommendation to purchase a pure protection policy by a licensed firm can reasonably be regarded as incidental and complementary to its professional services.

Estate Planning: Whole of life insurance/insurance bonds

 
Not regulated
  • General discussions with a client about different types of investments that provide IHT mitigation, but not discussions on the merits of a specific investment.
  • Providing the client with the name and contact details of an appropriately authorised firm (but not passing the client’s details to the firm). A suitable firm is one that is either independent, or places business with the product providers who account for a large majority of the relevant market, or offers the sector of the market which is most suitable for the client's needs.
  • Providing information to clients in respect of claims and assisting an insurer in the administration and performance of claims handling.
 
Regulated but can be done with a DPB licence
  • Explaining and evaluating advice given by an appropriately authorised firm and identifying whether this is suitable or not, but not providing alternative advice.
  • On the instruction of a client, arrange with an appropriately authorised firm the buying of these types of investments.
  • Implementing an investment plan in cooperation with an appropriately authorised firm.
  • Introducing a client to an appropriately authorised firm by passing a client's contact details to that firm for it to contact the client.
 
Regulated and requires FCA authorisation
  • Discussions with clients on the relative merits of the purchase of whole of life insurance or insurance bonds.
  • Recommending the purchase of whole of life insurance or insurance bonds and carrying our the transaction.

Auto enrolment

 

Accountants provide auto enrolment (AE) services to help client businesses identify and set up an AE compliant pension scheme for their employees. If the employees are themselves clients of the firm, then please refer to 'Accumulation - Pensions' on page 4.

Not regulated
  • Discussions with employers on the relative merits of an AE compliant pension scheme.
  • Recommending a specific pension scheme to employers and carrying out the transaction.
  • General discussions with employees on the different types of pension products available.
  • Passing client's details to an appropriately authorised firm or specific pension scheme with the client's consent for the firm or pension scheme to contact the client.
Regulated and requires FCA authorisation
  • Discussions with an employee on the relative merits and suitability of a specific pension contract eg, a particular self-invested personal pension offered by company X.
  • Recommending that an employee purchase a specific personal pension contract.

 Appendix

For further information on Retail Distribution Review (RDR), independent advice, types of products, product provider, restricted advice and adviser charging please see our appendix.