Reports that advisers would only be able to call themselves independent if they were fee-based are said to be unfounded.
Sources say that as long as advisers operate on a transparent remuneration structure and agree how much the customer is going to pay for their services upfront, they will be able to keep the independent label.
This can be done through factory-gate pricing, fee-based advice or offsetting commission as long as it is disclosed to the customer.
Another source says that the paper proposes that if advisers take certain qualifications to increase their “professionalism” and operate a transparent charging structure which avoids consumer detriment then they could get a reduction in their capital adequacy requirements as an incentive.
It is thought that adviser firms that do not achieve a certain level of professionalism and who present bigger compliance risks will be hit hard by having to hold higher levels of capital adequacy.
A source says the FSA is trying to redefine the term fee-based remuneration to mean any payment which has been agreed with the customer. The use of the label independent looks to be conditional on having agreed the level of remuneration upfront with the customer.
The four headings under which the market is likely to be segmented are professional financial planning, broad financial advice, no advice and general advice.
It is thought that smaller IFA firms in particular will be the focus of much of the RDR and that advisers will be given a timeframe within which to move to one of the four models if they are not already.