Aifa says advisers should seriously consider offering restricted advice but it should not be seen as a “soft option”.
The trade body’s new RDR paper, Advice Horizons, says restricted advice could generate efficiencies and offer new opportunities to some IFA firms.
Aifa points to the fact that restricted advice does not lower the threshold for professionalism or advisory standards.
The paper says: “Until recently, restricted advice has been viewed with disdain by many IFAs but there is a growing view that ’constraining’ a firm’s activities, and in particular its business processes, can generate efficiencies and also open up the opportunities to partner or joint venture with manufacturers and fund management companies – creating new revenue streams. Adopting a restricted advice model is not a soft option and should be given serious consideration as part of a strategic review.”
The paper says independent advice will become a “premium service” which will create new marketing opportunities as well as financial and reputational rewards.
It says: “Clients value the clarity and certainty of the fact that the adviser works on their behalf and, time and again, research proves that it is independent financial advisers who are the most trusted group in retail financial services.”
Aifa says many firms may look to offer a restricted service alongside an independent offering, depending on the service needs of their clients.
The paper suggests advisers could look to develop “advisory chambers” with companies retaining brand and ownership but sharing back-office efficiencies.
It says such a relationship could progress, so firms provide shared services to clients based on the depth of expertise within their chambers, which could be nationally dispersed.
The paper says: “The “ownership” of the client could be resolved on a formal, contractual basis, or via an informal mechanism based on quality and value of referrals. “Of course, larger firms may also use this model as they centralise specialist advice areas in order to ensure quality of advice, and hence lower their risk profile.”