Outsourcing paraplanning: what SYSC 8.1 says the firm keeps responsibility for, the twelve conditions, and a pass or fail check for the paraplanner's contract

An adviser who sends fact-finds to an outside paraplanner and gets suitability reports back is outsourcing. The FCA has rules about that, and the question for a small firm is what they ask it to do about the work that comes back. This guide sets out what SYSC 8.1 says, sorts its twelve conditions by who has to meet them, and counts the checking time a sensible sample costs.

What this is, and is not. A reading of SYSC 8.1 on the FCA Handbook site on 6 October 2026. We could not confirm two things. First, whether your firm is a "common platform firm", which decides whether SYSC 8.1 binds you as a rule or applies "as if" it were guidance under SYSC 1 Annex 1 3.2CR(1); the Handbook text says that, and we did not read the Annex to say which route a given advice firm takes. Second, whether writing suitability reports is a "critical or important" function for your firm. The rules below bite on critical or important functions, and that is a judgement the firm has to make and record. We did not read FCA guidance on paraplanning specifically.

What the rules say

SYSC 8.1.6R says a firm that outsources critical or important operational functions "remains fully responsible for discharging all of its obligations under the regulatory system". Four conditions follow: the outsourcing must not result in senior personnel delegating their responsibility; it must not alter the firm's obligations to its clients; it must not undermine the conditions of authorisation; and it must not remove or modify other conditions attached to authorisation.

In plain terms, the suitability report is still the firm's report. The client's complaint, the file check and the adviser's signature all stay with the firm, whoever typed the draft.

SYSC 8.1.4R and 8.1.4AR treat a function as critical or important if a defect or failure in it would materially impair the firm's continuing compliance. SYSC 8.1.5R lists functions that are not treated as critical or important for a common platform firm, and it names advisory services, legal advice, training, billing and security among them. We did not work out whether a drafting service for a suitability report falls under "advisory services" in that list, so we do not claim it either way. Ask your compliance consultant, and write down the answer and the reason.

The twelve conditions, sorted by who has to meet them

SYSC 8.1.8R lists twelve conditions. The sort below is ours: we read each condition and asked whose conduct it describes.

The count: 5 provider conditions (1, 3, 6, 8, 10), 5 firm conditions (2, 4, 5, 7, 12) and 2 shared (9, 11), which makes 12.

The point of the count is that a paraplanner's standard terms of service can only evidence the provider column. A contract that describes turnaround, price and confidentiality covers about 5 of the 12, and the other 7 are things your firm has to do or agree. Condition 5 matters most for a small firm: it must "retain the necessary expertise and resources to supervise the outsourced functions effectively". The adviser who signs the report has to be able to tell a good draft from a weak one.

SYSC 8.1.9R separately requires the rights and obligations of both sides to be set out in a written agreement, and that the firm keeps its instruction and termination rights, its rights of information, and access to books and premises. It also says the provider may outsource onwards only with the firm's written consent. That last point is worth a line in the contract if your paraplanner uses sub-contractors or overseas staff.

Working out the checking time

Condition 2 asks for methods to assess performance and to review it "on an ongoing basis". The rule does not say how many reports to check, so the number is the firm's decision. The figures below are our assumptions; replace them with your own.

• 40 outsourced reports a year.
• The adviser or a second person reviews 1 report in 5, chosen in advance, and every report from a new paraplanner for the first three.
• 45 minutes per review against the points in the suitability report file check.

Sample: 40 / 5 = 8 reviews. Time: 8 x 45 = 360 minutes, which is 6 hours a year. The first-three rule adds 3 x 45 = 135 minutes once, 2.25 hours, for a new supplier. Compare the total with the in-house paraplanner cost per report before deciding whether outsourcing saves money once checking is counted.

A pass or fail check for the arrangement

1. Written agreement in place, with instruction, termination, information and access rights (8.1.9R).
2. Written note of whether the firm treats report drafting as critical or important, with the reason.
3. Evidence the provider is able to do the work: authorisation if any is needed, capacity, and who actually writes the drafts (condition 1).
4. A sampling plan and a dated record of each review (condition 2).
5. A named person with the expertise to supervise (condition 5).
6. A clause requiring the provider to tell you of material developments, such as staff loss or a data breach (condition 6).
7. A notice period short enough to stop work at once if clients are at risk, and a plan for who writes reports if you do (conditions 7 and 12).
8. Confidentiality and data terms, which link to our guide on AI and client data if the provider uses AI tools.
9. Records kept for the periods in the retention guide.

Mark each line pass or fail. Any fail is something to fix before the next report goes out, and the firm should record it.

Overlyft can set up an AI assistant that logs each outsourced report as it returns, picks the one in five for review, puts the file check points beside the draft, and records the reviewer's result for the owner to approve, so a person still makes the call.

This is general information, not legal advice.