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Advisers who restrict cover face losing independent status

Advisers who fail to offer life insurance, income protection and critical-illness cover could lose their independent status.

In December’s retail distribution review consultation paper, the FSA says only 40 per cent of investment advisers currently sell all three protection products but warns that the 60 per cent of investment advisers who limit their advice to one type of protection product will have to label themselves as restricted.

CWC Research senior partner Clive Waller says: “What the FSA is saying, and quite rightly, is that if you are an IFA you cannot exclude one of the most important protection products that a client would need, which is income protection. If you do not look at the whole of protection then you cannot call yourself an independent adviser.

Master Adviser IFA Roy McLoughlin says: “There are lots of advisers who should be selling protection but don’t. However, they are going to have to unless they want to state that they are giving restricted advice. You cannot talk to your clients solely about their investment needs and ignore their protection needs. That is the crux of holistic financial planning.”

McLoughlin believes that many investment advisers look down on protection.

He says: “We have all become obsessed with wealth management at the expense of equally important areas such as protection.”


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. You have to laugh. as a GP IFA, we do a bit of everything, but I knwo when I am out of my depth and some more escoteric investments and some I just don’t understand might have resulted in my being forced to hold myself up as being a “Restricted Adviser” with not ites as from the RDR and all these Investment only “wealth managers” who seem to look down on us GP IFAs and banging the drum for us to obtain qualifications in sthings I never havve and never will advise a client on (as if it thought there was a knowledge gap I WOULD refer them to a specialist) may now find that becuase THEY restrict their advice to investment only, they may end up rrestricted.
    Ironically it looks like teh bigger the firm, the more likely you will be able to retain your Independant status, simply by having 99 Investment adviser and one protection adviser… on teh same FSA authorisation instead of different firms with their own FSA authorisation who form an LLP to deliver services.
    What a JOKE the RDRs laudable (stated although I do have my doubts about whether stated and actual aims are the same) intentions are becoming.

  2. I agree entirely with Phil on this. I suspect the vast majority of ‘GP’ IFAs backgrounds are laced with investment advice capability, but the current climate is far more ‘exotic’, leading to a preference for referring to those colleagues who specialise in the identified client profile.
    No more no less than a medical GP referring a patient to a consultant specialist, should he or she than be tarred as being a ‘restricted Doctor’ by the BMA?

  3. So once again, the FSA are ruling that every IFA must know ALL about EVERY aspect of FS – indeed, every IFA must know more that the collective FSA do.
    We know they like large firms because they are easier to bully, but killing off specialist small firms is insane.

  4. Ooh !

    That’s “some” Wealth Advisers in an even more sticky wicket then; given “some” of them don’t do it anymore, as its time consuming, and can’t get a “fee” out the client! I know of at least one large company who used to selll bucket loads of protection when their companies were commission based, but stopped it almost all together when they were bought up by a national “chartered” company.

    Why cant the FSA look into these “independant” Financial Planners.

    Sounds “fishy” to me !!!

  5. Whilst we must know everything it is instructive to see how the FSA didn’t ‘know’ that keydata was an adviser and not a provider.

    The crux of this article is sound – I have had my fill of wealth managers, financial arhcitects, investment guru’s, Fishy fund managers, stochastic modellers and tactical tilters who peer down their snouts at those advisers arranging and advising on protection. Somehow it is beneath them.

    Equally, the reality of business is that we all; generalise or specialise and there is nothing wrong with that as long as the consumer is fully aware of limitations and restrictions.

  6. “They” do listen.

  7. Anonymous come on be fair.

    I am a fee only wealth adviser and write no end of protection business. Protection is far better value for larger premium business when arranged on a fee only basis and deep down we have all always known this.

    That said it can be difficult to arrange IPI for people in retirement so large companies with mature client books may struggle to do as much as those working with graduates…

    Why have you such a problem with a large successful firm, one day all firms will operate along the same lines. None of us are running charities are we?

  8. D – Why did you have to post your comments without your name. The point is in fact teh reverse, we have nothing as small IFAs against large firms, but you should not have to be a large firm in order to mainitain your independance by being able to say, we’re independant as we have one adviser who does protection and everyone else does Investment business only in the firm.
    I want to have chineese walls between me and other people giving specialist advice and for me the way to do that is be a seperate legal entity to reduce risk of contamination by error. Anyone who has ever worked in an network which has ceased to trade should be wary of jumping in to bed with anyone whi can contaminate them and the best way is to be directly regulated for my mind, the problem being perhaps being forced to become a restricted adviser, not because we are not Independant, but becuase we restrict our advice to the skills and knowledge we have! If the FSA used the FSA register and allowed advisers to port from one firm to anotehr, this would not be such an issue, but when we read about A20, Park Row and other firms where adviser can’t work due to transition problems when a firm stops trading, this is NOT on.

  9. This simply isn’t true.

    “Independent advice” is defined in the RDR Draft Rulebook [CP 09/18, Appendix A] as the giving of “a personal recommendation to a retail client on a Retail Investment Product”.

    What the Draft Handbook Guidance says is that if you are a specialist adviser (e.g. it gives advising only on ethical investments as an example), you can say that you are offering “independent financial advice” on those ethical invetment but should avoid presenting yourself as “Independent Financial Advisers” generally [Draft 6.2A.4 G(2)]

    However, Protection does not come into this. It’s not a “retail investment product”, and so is outside RDR. And post-RDR, I would expect most sensible IFAs will write Protection under the ICOB rules and not the COBS rules simply to avoid having to apply “adviser charges” to Protection.

  10. MIB – Yep, you are right, I juts haven’t read the RDR paper recently and have lost track of which one said which.
    Re portection, I was actually planning on remaining under ICOB and doing advsier charging on protection if I can get it to work right between now and 2012….

  11. It does make laugh when some of you feel inferior. Chip on the shoulder or what! For the record I write a lot of investment business and hardly any protection business. Why? Because most of my clients don’t need protection. I always look at the whole picture when advising clients and I am sure most IFAs do the same. Otherwise you aren’t doing your job properly and could be liable to complaints. Most of my clients are retired and have no need for life insurance of any sort or obviously phi.

  12. Which IFA firm would limit itself to one protection product?

    I do not think that multi tied protection IFAs should be called IFAs either, it gives the wrong impression.

    If IFAs do not offer protection they they should not be IFAS either. Every client of mine for every investment written has to sign off every type of protection and prove they know what it is to me.

    I actually agree with the FSA!!! I knew it would happen one day.

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