The Financial Services and Markets Act 2023 (FSMA 2023) marks a significant evolution in the UK’s regulatory landscape. Designed to modernise financial regulation and ensure alignment with post-Brexit priorities, this Act introduces measures that will undoubtedly affect Independent Financial Advisers (IFAs) and their clients. Let’s unpack the key elements of the Act and how they may influence your advisory practice.
One of the primary objectives of FSMA 2023 is to replace EU-derived financial regulations with a more tailored UK-specific framework. This new approach allows regulators such as the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) to have greater flexibility in rule-making. For IFAs, this means a potential shift in compliance requirements, with the need to stay vigilant about new rules tailored to UK markets.
"A landmark Bill to regain control of the financial services rulebook has been granted Royal Assent today (Thursday 29 June)." (gov.uk)
Key takeaway: Keep an eye on updates from the FCA as it exercises its new powers under the Act. Changes could impact areas such as client disclosures, investment advice, and reporting requirements.
FSMA 2023 emphasises the importance of fostering innovation while maintaining robust consumer protections. Initiatives such as the introduction of regulatory “sandboxes” for fintech solutions aim to encourage the development of cutting-edge financial products and services. For IFAs, this could open up opportunities to offer new investment options or technological solutions to clients.
"The Financial Services and Markets Act 2023 is central to delivering the Government’s vision to grow the economy and create an open, sustainable, and technologically advanced financial services sector." (gov.uk)
Key takeaway: Consider exploring innovative tools or products that align with your clients’ needs. Staying ahead of technological trends could help you differentiate your practice.
The Act reinforces the UK government’s commitment to safeguarding consumers in the financial services sector. Enhanced transparency and stricter rules around mis-selling are central to these measures. For IFAs, this underscores the importance of maintaining impeccable compliance and ethical standards.
Key takeaway: Ensure your client communication is clear, transparent, and well-documented. A focus on ethical advisory practices will not only protect your business but also strengthen client trust.
FSMA 2023 also addresses specific challenges in the retail investment market, including access to advice for less affluent individuals. By supporting initiatives like simplified advice models, the Act aims to make financial advice more accessible. For IFAs, this presents an opportunity to broaden client bases by offering tiered services that cater to different financial needs.
"The Act therefore revokes retained EU law relating to financial services and enables HM Treasury and the financial services regulators to replace it with legislation designed specifically for UK markets." (legislation.gov.uk)
Key takeaway: Assess your service offerings to ensure they are inclusive and accessible. Adapting to these changes could allow you to tap into new market segments.
ESG considerations continue to gain momentum, and FSMA 2023 explicitly supports integrating sustainability into financial services. This includes enhancing transparency around ESG investments and ensuring products marketed as “sustainable” meet rigorous standards. IFAs will need to deepen their understanding of ESG products to meet growing client demand.
Key takeaway: Stay informed about ESG criteria and ensure you can confidently discuss these options with clients. Offering expertise in this area could position your practice as forward-thinking and socially responsible.
Finally, FSMA 2023 reflects the UK’s ambition to seize opportunities arising from its regulatory independence post-Brexit. This includes making the UK a global hub for financial services. While this brings opportunities, it also means increased scrutiny and potential rule changes that IFAs must navigate.
Key takeaway: Use the opportunities created by FSMA 2023 to diversify your services or expand into new markets, but stay prepared for regulatory adjustments.
Stay Informed: Regularly review updates from the FCA and PRA to understand how the new rules will affect your practice.
Enhance Compliance: Review your compliance processes to ensure alignment with enhanced consumer protection measures.
Leverage Technology: Explore innovative financial tools and platforms to improve client services and operational efficiency.
Focus on ESG: Build expertise in sustainable investing to meet growing client demand.
Adapt Services: Consider offering scalable advice models to attract a broader client base.
The Financial Services and Markets Act 2023 represents a pivotal moment for the UK’s financial services industry. For IFAs, it brings both challenges and opportunities. By staying proactive and adaptable, you can ensure your practice thrives in this new regulatory environment while continuing to deliver exceptional value to your clients. Embrace the changes, and position your business as a leader in the next era of financial advice.
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