EU Residents, Financial Advice and Brexit
The Brexit Trade Agreement did not include financial services passporting although it was supposed to. Negotiations are ongoing with regard to ‘Equivalency’ on financial services with 5 X Memorandums of Understanding (MOUs) agreed in January 2021 but not yet signed. MOUs are essentially ‘agreements to reach an agreement’ only. One of the MOU’s between UK and EU regulators confirms that they are working towards ‘delegated authority’ where if an EU resident has a UK pension/investment, then respective EU advisers are not authorised to advise on unless they have set up a UK branch with FCA authorisation in the UK and therefore advice will need to be delivered by a UK authorised IFA. This is where EU regulators delegate their authority to the UK FCA to oversee and regulate the advice on a UK pension/investment.
The Five Memorandums of Understanding
There has been a ‘state of flux’ since 2021 as negotiations continue, so technically, we are no longer authorised in EU (for the time being) even on helping with UK interests but things have taken a positive step forward.
EU Signs Draft MOU
Of the above 5 MOUs, the European Commission has now adopted a draft of the first MOU to create a framework for financial services regulatory cooperation with the UK see - Multilateral MoU concerning consultation, cooperation and the exchange of information between each of the EEA competent authorities and the FCA.
If then signed by the UK authorities, the draft MoU will create an administrative framework for voluntary regulatory cooperation, including an EU-UK joint Financial Regulatory Forum, which would serve as a platform to facilitate regulatory dialogue. It was the Windsor Framework on EU NI Protocol signed in March 2023 that has now paved the way for pushing ahead on financial services co-operation and agreement.
See: Brexit Finance
Current Procedure for Financial Advice to EU Residents
The MoU does give the UK access to the EU's single market or vice versa, and it does not prejudge the adoption of equivalency on rules and regulations as well as delegated authority. Therefore, as financial advisers with both clients and potential clients approaching us regularly for existing UK pensions and investment advice but now being tax resident in the EU, until we have an agreement on ‘delegated authority’ (Article 16 of the 1st MOU), we must continue our current procedures of:
Mairead McGuinness, EU commissioner for financial services, financial stability and capital markets union, said: "The Windsor Framework allowed the EU and the UK to open a new chapter in our partnership based on a spirit of mutual trust and cooperation. I am confident that our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity, and the protection of consumers and investors."