Can you trust your fundraising advisor? 

Companies looking to raise money face tough market conditions. Fundraising across all asset classes declined globally by 28% in 2024 to $104bn (£77.3bn) – the lowest annual total in over a decade.

The scarcity of capital, driven by hesitant investors and economic uncertainty, means demand for external fundraising advisors has grown. These intermediaries earn a fee by matching executive teams with the right investors. A well‑networked adviser can accelerate raises, improve valuation and help companies to avoid costly missteps. 

But as demand for these services grow, so too does the risk of bad actors and unqualified consultants entering this unregulated corner of the market. 

A legal grey area

“The UK’s fundraising advisory sector remains largely under-regulated, with outdated frameworks that haven’t kept up with how private capital markets have evolved,” says Mark Lucas, partner and head of corporate at Moore Barlow, a UK-based law firm. “This regulatory gap can create opportunities for bad actors, especially in private fundraising and placement services. Calls for clearer boundaries and stronger due diligence standards aren’t new; they’ve been building for years.”

Under section 21 of the Financial Services and Markets Act, a person who “arranges” investments in the UK needs permission. Yet many fundraising advisors still operate without FCA oversight, taking advantage of exemptions and loose definitions in current law. 

“This is because the activities they perform, such as making introductions to potential investors, are not themselves regulated under the Financial Services and Markets Act,” explains Stephanie Thirlwell, head of the business crime and regulations team at Rradar, a legal consultancy. “Unless an advisor is conducting activities like arranging or advising on investments, they can operate with few legal obligations or oversight.”

This creates a legal grey area in which individuals or firms can charge substantial fees with no guarantee of success or even suitability of an investor introduction.  Unlike more tightly governed sectors such as investment advice or M&A, there are no conduct rules or oversight mechanisms holding these advisors to account. Critically, there is no statutory requirement to provide transparency over success rates, qualifications or client outcomes. Nor is there recourse through the Financial Ombudsman Service for companies who feel misled or exploited if the introducer is not connected to a regulated business. 

“Worryingly, the absence of a regulatory framework effectively means that almost anyone can present themselves as a fundraising advisor – with no licensing, professional standards or enforceable codes of conduct,” Thirlwell says. 

A recent investigation conducted by Sifted highlighted the extent of the regulatory blind spot. In an analysis of FundraisingAdvisors.app, a website advertising the services of advisors, it found that only two advisors based in the UK said on their profile that they are regulated, while nine did not. 

Horror stories 

The private markets are littered with horrifying tales of companies paying large sums of money to advisors who then disappear without a trace. 

Edwin Chan is a managing director at Carta, a fund management platform. Over the years, he’s witnessed companies being approached during industry events by fake consultants offering investor introductions: “I’ve seen teams spend months in exclusivity with an investor, only to find they do not exist. Upfront retainers for as high as £50k have been taken with no measurable progress.”

There is very little transparency in the sector, Chan says. “With no information available, it is very difficult for businesses to verify what they’ve been told.” First-time fundraisers, without established networks, are particularly vulnerable in this environment. 

A lack of regulation creates clear risks for businesses. Without formal oversight, there’s limited accountability and firms may face inconsistent advice or unethical practices. This increases the chance of financial loss or reputational damage during critical funding rounds. Poor investor fit or bad advice can, in some cases, lead to inflated expectations around what the business should be worth or unrealistic valuations that can detract investors. Such missteps can lead to painful down rounds later or damage the firm’s credibility in the wider investor community. “You risk wasting months chasing a number the market won’t support,” Chan says.

Many companies have been forced to take matters into their own hands, stresses Lucas. “Until regulation catches up, the responsibility for assessing and mitigating these risks falls squarely on you.”

Spot the red flags 

One major red flag is being asked to fill in a form committing to an upfront retainer. “That’s not how it works and if a broker you’ve never heard of before doesn’t want to build a relationship with you and only wants upfront fees you’re probably going to get scammed,” Chan says. While success‑based fees keep interests aligned, hefty retainers paid before any investor outreach shifts all the risk to the firm.

Vague investor networks, guaranteed raise amounts, pressure to sign quickly or refusal to work under a non‑disclosure agreement also signal trouble. “Anyone engaging in high-pressure tactics should be viewed with suspicion,” says Caroline Black, a consultant in the business crime and corporate investigations sector at Gherson Solicitors. “Legitimate advisors will provide clear comprehensive advice and afford time to consider its content before proceeding.”

She adds: “If an opportunity seems too good to be true, it most likely is.”

In the absence of a regulatory framework, businesses must take precautions. Where there is suspicion or mistrust, a first step should always be to check with the FCA to determine if a firm or individual is authorised, says Black. “Due diligence on the individual or firm should always be conducted, including open source research and reference checks.”

Most experts recommend that businesses ask for at least three company references from the past 12 months, then verify outcomes independently. 

Ensuring contracts clearly define what services are being offered, what constitutes success and what fees are payable at each stage can reduce any uncertainty. Similarly, tying payments to clear deliverables can mitigate financial risk. This might include a fixed fee upon confirmed investor meetings, as opposed to vague introductions, or the creation of a data room, a secure online space used to share important financial documents with investors. 

How to get the most from your advisor 

When a consultant is genuinely competent and properly regulated, however, the service can unlock tremendous value, says Dawn McGruer, founder of Dawn McGruer International, a business consultancy. An experienced advisor can boost investor confidence, shorten the time to close and free up executives’ time to run day‑to‑day operations.

But none of this is guaranteed and quality varies widely even among legitimate players, McGruer warns. “Executive teams should prioritise advisors with proven track records and strong references. But experience in a specific sector or funding stage is also incredibly important.”

Businesses should ensure alignment on goals and expectations upfront. The clearer a firm’s strategy is, the more targeted and effective an advisor can be. “A good consultant brings strategic insight beyond just introductions, offering practical support through due diligence, negotiations and closing,” McGruer says. 

Ultimately, the executive team is responsible for how the company is presented to investors and should not become overly dependent on an advisor. It is up to the business to gather investor feedback and gauge how well its message is landing. Close collaboration with advisors, not delegation, is the most effective way to drive investor interest and accelerate the fundraising process.

Is more regulation the answer? 

A debate is intensifying over whether the FCA should introduce targeted regulation for fundraising intermediaries to protect inexperienced companies from poor advice, opaque fee structures and opportunistic middlemen. Thirlwell suggests a new code of conduct be introduced. “This would be a welcome protection, especially for early-stage companies, many of whom are navigating capital raising for the first time.”

Others, however, insist that more rules could backfire, choking an already risk-averse market and distracting from deeper issues, such as the UK’s struggle to attract active investors in the first place. “In my opinion the entire sector is over-regulated and adding to the calls for more unnecessary regulation further stultifies this sector,” argues James Kaufmann, a corporate commercial partner at the law firm Hill Dickinson.

The real issue, he says, is that there are too few investors willing to invest. “The solution isn’t more regulation. The answer has to be to find a way to make investment in the UK more attractive.”

Until that happens, critical judgement and common sense are the best defence. Fundraising advice should be treated like any other high-risk service: businesses should not rely on impressive looking websites or sales pitches alone.

Companies looking to raise money face tough market conditions. Fundraising across all asset classes declined globally by 28% in 2024 to $104bn (£77.3bn) – the lowest annual total in over a decade.

The scarcity of capital, driven by hesitant investors and economic uncertainty, means demand for external fundraising advisors has grown. These intermediaries earn a fee by matching executive teams with the right investors. A well‑networked adviser can accelerate raises, improve valuation and help companies to avoid costly missteps. 

But as demand for these services grow, so too does the risk of bad actors and unqualified consultants entering this unregulated corner of the market.