When a UK business needs to secure finance—whether for growth, equipment purchase, or cash flow management—working with a finance broker can streamline the process. However, not all finance brokers are created equal. 

Some are authorised and regulated by the Financial Conduct Authority (FCA) and may also hold NACFB Assured status, while others operate without FCA regulation. 

The decision to work with either type of broker can have significant implications for a business owner. 

In this blog, we’ll explore the key differences between FCA-regulated, NACFB Assured brokers and non-regulated brokers, along with the pros and cons of working with each.

What is an FCA-Regulated Broker? 

The Financial Conduct Authority (FCA) is the UK’s financial regulatory body, tasked with overseeing financial markets, including brokers, to ensure that they operate fairly and transparently. Brokers who are authorised and regulated by the FCA must adhere to strict guidelines regarding how they treat customers, handle complaints, and disclose information. 

FCA-regulated brokers may also seek to achieve NACFB Assured status, which is a mark of professionalism awarded by the National Association of Commercial Finance Brokers (NACFB). 

This status indicates that the broker has met additional industry standards, including compliance, good governance, and ongoing training. 

What is a Non-Regulated Broker? 

A non-regulated broker is a finance intermediary who is not subject to oversight by the FCA.

While they may have experience and connections within the finance industry, they are not required to follow the same strict rules and regulations that govern FCA-regulated brokers. This means they may not be held to the same standards when it comes to transparency, consumer protection, and ethical practices. 

Key Differences Between FCA-Regulated and Non-Regulated Brokers 

1. Regulation and Oversight:

• FCA-Regulated Brokers: These brokers are held accountable to the FCA’s regulatory framework. They must operate with integrity, treat customers fairly, and ensure transparent and clear communication throughout the finance process. They are also subject to audits and can face penalties or removal of their authorisation if they fail to comply with regulations. 
• Non-Regulated Brokers: Non-regulated brokers are not required to follow FCA rules, and therefore, may not be as accountable in terms of fairness, transparency, or dispute resolution. 

2. Professional Standards:

• NACFB Assured Brokers: Brokers with NACFB Assured status are members of the National Association of Commercial Finance Brokers, which imposes a code of conduct and best practices on its members. NACFB-assured brokers are regularly assessed for compliance and undergo continuous professional development. 
• Non-Regulated Brokers: These brokers are not held to NACFB standards, meaning there may be less guarantee of ongoing professional development or adherence to a specific code of conduct. 

3. Customer Protection: 

• FCA-Regulated Brokers: Clients working with FCA-regulated brokers have the peace of mind that the broker operates under a regulated framework, meaning there are established channels for dispute resolution, such as the Financial Ombudsman Service. Customers are also protected against misleading advice or unfair treatment. 
• Non-Regulated Brokers: Clients do not benefit from the same level of protection when working with non-regulated brokers. If something goes wrong, there may be limited recourse to resolve disputes. 

4. Transparency and Disclosure: 

• FCA-Regulated Brokers: These brokers must be fully transparent about fees, commissions, and any potential conflicts of interest. They are obligated to clearly communicate all terms and conditions related to any finance deal. 

• Non-Regulated Brokers: While some non-regulated brokers may act in good faith, they are not legally required to disclose commissions, fees, or conflicts of interest, which could leave businesses vulnerable to hidden costs or biased advice. 

Pros and Cons of Working with FCA-Regulated and NACFB-Assured Brokers 

Pros of Working with FCA-Regulated and NACFB-Assured Brokers: 

1.  Trust and Accountability: These brokers operate under a regulatory framework that ensures they are accountable to both the FCA and industry best practices, making them more trustworthy. 
2. Customer Protection: The regulatory framework provides business owners with a safety net, as they are protected by the Financial Ombudsman Service and have avenues for dispute resolution. 
3. Transparency: FCA-regulated brokers are required to disclose all relevant information regarding fees and commissions, so businesses can be confident they understand the full cost of any finance deal.
4. Ethical Standards: NACFB Assured brokers have been vetted for their professionalism and ethical conduct, meaning they are more likely to offer impartial advice that suits the client’s needs. 
5. Peace of Mind: Business owners can feel more secure knowing that they are dealing with professionals who must adhere to rigorous guidelines. 

Cons of Working with FCA-Regulated and NACFB-Assured Brokers: 

1. Potentially Higher Fees: FCA-regulated brokers may charge slightly higher fees compared to non-regulated brokers due to the cost of compliance with regulatory requirements. 

2. Longer Process: The regulatory compliance involved with being FCA-regulated might make the process of securing finance more formal or lengthy due to strict documentation and checks.

Pros of Working with Non-Regulated Brokers: 

1. Potentially Lower Fees: Without the cost burden of regulation, non-regulated brokers might offer lower fees or more flexible payment structures. 

2. Flexible Service: Non-regulated brokers might have more freedom to act quickly and take a less formal approach to securing finance, which could appeal to businesses seeking fast or alternative funding. 

Cons of Working with Non-Regulated Brokers: 

1. Lack of Customer Protection: Without FCA oversight, businesses are more exposed to potential malpractice, misleading advice, or unfair terms. There’s little recourse if something goes wrong. 
2. Risk of Hidden Fees: Non-regulated brokers are not required to be as transparent about fees or commissions, potentially leading to unexpected costs down the line. 
3. No Ombudsman Access: If a business feels wronged by a non-regulated broker, they have no access to the Financial Ombudsman Service, limiting their ability to resolve disputes. 
4. Unreliable Standards: Non-regulated brokers may not adhere to a strict code of conduct, leaving businesses uncertain about the quality or integrity of the advice they receive. 

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Which Broker Should You Choose? 

As a business owner, choosing between an FCA-regulated, NACFB Assured broker and a non-regulated broker comes down to your priorities: 

If you value trust, protection, and transparency, an FCA-regulated broker with NACFB Assured status is likely the best choice. The regulatory oversight ensures that you are working with a broker who follows industry best practices and offers a higher level of professionalism and accountability. This is particularly important for businesses making significant financial commitments or those seeking long-term finance solutions. 

If speed and cost are more important to you, and you’re comfortable taking on more risk, a non-regulated broker may offer faster and potentially cheaper services. However, you should carefully assess whether the short-term benefits outweigh the lack of customer protection and transparency. 

Conclusion 

For most businesses, working with an FCA-regulated, NACFB Assured broker offers clear advantages in terms of customer protection, transparency, and professionalism. While non-regulated brokers may seem attractive due to lower costs and a more flexible approach, the risks of working without regulation—such as hidden fees, lack of protection, and potential for biased advice—are considerable. 

Ultimately, choosing a broker comes down to balancing your need for security and professionalism against your appetite for risk. For peace of mind and assurance that you’re getting the best deal tailored to your needs, an FCA-regulated and NACFB-assured broker is often the safer choice. MacManus Asset Finance provides you with the best of all worlds, as being both FCA-regulated and NACFB-assured, and at the same time offering our clients a Fee-Free Guarantee meaning we will never charge you any broker fees. For more information please call us on 01443 800621 or email info@macmanus.finance.