If you’re thinking about using a financial advisor or you’ve started researching where to get good financial advice then chances are you will have come across the term “FSA approved” quite a lot (if you haven’t then it can be said right now you shouldn’t take advice from any of the people you’ve come across). You’ve probably got an idea of who the FSA are, but you might not fully understand the implications of FSA approved, or what it means to get financial advice from a company or individual without this certificate. This article will cover the basic facts about who the FSA are, what they do and what FSA approved really means, so you can get a firm understanding of the risk involved in getting financial help from anyone other than a certified financial planner.
Who are the FSA?
The FSA or the Financial Services Authority is an independent, non-governmental body responsible for the regulation of financial services in the UK. It is given statutory powers by the Financial Service and Market Act 2000. The company is financed by the financial sector (the companies it regulates) rather than the government, but is accountable to Treasury Ministers and, through them, parliament. The basic statutory objectives of the FSA are as follows:
- Market confidence
- Financial stability
- Consumer protection
- Reduction of financial crime
The FSA has a variety of rule-making, investigatory and enforcement powers to ensure these four principles are abided by.
What does FSA Approved Mean?
FSA approval means an individual or individuals within a company have been approved to perform a controlled function. A controlled function is a role within a business or firm which has regulatory significance. Not all companies will need to be approved for every controlled function; rather they will be approved for the specific controlled function they carry out. In order to gain approval an individual must pass the “fit and proper test”, and perform their controlled function within a set of standards known as the ‘Statements of Principle and Code of Practise for Approved Persons (APER)’.
The “fit and proper test” is not an exam you have to pass, but rather an assessment carried out by the FSA, determining whether a person is capable of carrying out the controlled function they have applied for. In order to determine this, the FSA assess:
- Honesty and integrity
- Financial Soundness
- Competence and capability
An individual applying for FSA approval will have to fill out an application form requesting relevant information, for example past financial behaviour, and the FSA will then award an approval or not. If the FSA has concerns they will offer a “warning notice” and the individual will have the opportunity to challenge the concerns in writing or person before a final decision is made.
If an approved person does not comply with the APER, then they are at risk of a fine or public reprimand. FSA approval may also be taken away from an individual. Such an occurrence has significant ramifications for their future career.
Should I Risk Advice Without Approval?
The short answer is no, you should never take financial advice from an individual or organisation which cannot prove it is FSA approved. Usefully the FSA have a comprehensive list of qualified and approved financial advisors which you can search to make sure the people you are dealing with are reputable. FSA approval is common amongst all kinds of firms whether they be directly financial or not. For example if a vet recommends a kind of pet insurance someone within the firm (the most senior person) must have FSA approval. For a financial advisor to lack this, then, is a very serious concern. You should avoid taking advice from anyone who cannot prove their FSA status.