IFA permissions · FCA
Discretionary vs advisory FCA permissions — what it means for your PII
Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 15 July 2026
IFAs with discretionary permissions carry different PI risk to those with advisory-only permissions. Insurers price this in materially.
The permission distinction
Advisory-only IFAs recommend investment actions; the client executes.
Discretionary IFAs execute investment actions on client behalf without needing per-transaction approval.
Both operate under FCA COBS but the claim patterns differ.
PII cost impact
Discretionary firms typically pay higher PI premiums by 25-40% for the same fee income — more claim exposure per pound of fees.
The premium delta narrows for smaller books with straightforward mandates.
Consumer Duty (PRIN 2A) applies equally — the standard of care is the same in either model.
Cover considerations
- Aggregate limits matter more with discretionary permissions.
- Retroactive date should cover the earliest discretionary trade.
- Sub-limits for cyber and social engineering are increasingly important.
- Consider FOS jurisdiction: consumer discretionary claims can reach FOS.
Frequently asked
Are discretionary permissions harder to insure?
Not harder to insure — but priced higher. Insurers use discretionary status as one input into their overall risk assessment.
Can a firm hold both permissions?
Yes. Many firms hold both and offer clients a choice. PII cover should reflect the mix.
Does Consumer Duty change PI needs?
It raises the bar for advisers overall. Higher standard of care means higher potential for claims where advice fell short.
What about DFM (discretionary fund management)?
DFM firms have separate FCA permissions and typically carry materially higher PI limits — often £5m+.
Are AR firms affected?
AR firms operate under the principal's permissions and PI. The principal's PI needs to reflect the AR's activities.
Does restricted vs independent affect PI?
Restricted-status firms may face different claim patterns (product suitability, panel construction) but PI minima are the same under IPRU-INV 13.
Related
- IFAs PI insurance UK guide 2026
- FCA COBS 9 suitability framework
- Consumer Duty PRIN 2A for professional firms
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. Registered in England and Wales, company number 07014570.