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Alistair Cunningham: The dividing line between indy and restricted


After failing to find a buyer, Friends Life has announced the possibility of winding down the Sesame network. Concerns over historic liabilities and a high-profile conversion to restricted-only advice may have hammered the nail in that particular coffin. Conversely, Old Mutual has purchased Intrinsic and Skandia has been added to the network’s restricted panel. One can only assume  this acquisition was a strategic attempt to buy distribution.

I cannot see that the independent arm of Intrinsic will survive as the firm’s core proposition is already restricted and therefore it seems logical that Intrinsic multi-tied advisers would not have the same emotional attachment to independence that Sesame advisers had. Restricted advisers are clearly a more rewarding route for Old Mutual to distribute Skandia and other Old Mutual group products.

Last week, St James’s Place entered the FTSE 100. Irrespective of your views as to its proposition, it has been one of the great winners of the RDR.

This year looks like the time to draw a line in the sand and take a position: on one hand, independence, with all the due diligence and increased compliance that this represents, on the other, single-tied restricted, where provider self-interest often comes at the expense of consumer benefit.

Or do you prefer a hybrid approach, anything from a limited range of solutions to whole of market restricted (an artificial allusion to “almost independent” that the FCA has intimated it does not like)?

I think the decision depends on who you ultimately hold allegiance to: A client benefit to a move to restriction could be keener terms, especially on annuities, for example. Prohibition of advice on complex financial products can also lead to better outcomes, particularly where firms are dealing with clients with more simple needs. However, where a firm is restricted due to a wish to peddle more of one provider’s products, it seems hard to see the benefit to the end customer.

The surge in restricted firms means independence is beginning to look like a quaint relic and provider ownership more the norm; Sesame, Origen, Tenet, Openwork and now Intrinsic account for over half of the advisory population.

I am holding myself up for criticism but I would certainly anticipate that sales-focused direct and restricted firms are less likely to focus on long-term cashflow planning, which by its nature tends to be more oriented around a client’s ambitions rather than a product-oriented “need”.

Stung by previous claims, the nature of these firms is to restrict outcomes even where there is clear client detriment – I heard of one restricted network that has a long-term ban on the use of life assurance bonds.

I am not convinced we are returning to a world of door-to-door calls and man from the Pru salespeople but I see a need for independents to specialise and focus on those with more complex requirements.

Restricted firms are uniquely well positioned to offer simplified products, which rightly should be tightly regulated and provided to those with simpler needs. Focusing on more complex requirements does not mean that independents need to offer more complex solutions, but offer a broader range of services, for example, tax planning, cashflow planning, estate and succession management etc.

Like the markets who cater to the discerning shopper, those wanting to be independent will find their services are more valued by those with a greater level of disposal income and more than a low level of assets.

Alistair Cunningham is director of Wingate Financial Planning



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Interesting points.

    For me, independence is clear, specific and the client understands precisely what they are getting. There is no conflict of interest and no limitations – however this of course requires additional effort to maintain the ‘status’ and is also likely to result in higher PI Insurance.

    On the flip side, Restriction does what it says – however whether this has a detriment to the client will depend on what the client wants and therefore it’s impossible to know given that each client is unique – (i.e. how would a client ever know whether the restriction has a negative impact on them?).

    The frustrating issue is that firms who package and sell their own products via a tied sales force have the same designation as someone who perhaps has access to the whole range of investment and pension solutions but has decided to restrict themselves by (for example) not wanting to factor UCIS or VCTs into their suite of solutions. Whilst I don’t like the designation ‘whole of market restricted’ I do feel that Restricted is perhaps overly encompassing given the range of distribution models AND investment solutions is covers.

    My further fear is that clients are unaware of all of this and simply get drawn into a sales pitch where the disclosure is not clear (or is put in a positive light)…. bearing in mind that it’s not that long since ‘Commisison’ was been touted as enabling ‘free advice’ to be given by Banks.

  2. Whatever definition of Independent you care to adopt one of the core principles is to be independent of any outside influence whatsoever and the independence to set your own tariff.
    This is patently not the case with half the adviser community – and more besides I would hazard. Why this rather more simple definition wasn’t adopted by the Regulator in the first place merely points to the type of inexperienced people that drafted the rules. All with exclusively large company experience and time with one of the big four accountants no doubt.

  3. I really do believe that the Regulator must regret their choice of terminology. If I was a restricted adviser (and I’m not, by the way) then I would ask myself what can an Independent Adviser give advice on that I cannot. The answer is nothing. The apparent difference between a restricted adviser and an Independent adviser is that an Independent adviser must demonstrate the ability to source solutions across all Retail Investment Products. The restricted adviser can choose to do this when necessary but is not obliged to. I guess, therefore, that it all boils down to the question of trust. Can a restricted adviser rely on a client to trust him to source products/solutions WHEN NECESSARY in the same way as an Independent is obliged to. Time will tell – unless the Regulator decides to change the terminology and finds a less unappealing alternative to the word ‘restricted’. If that happens then watch the stampede for an exit from the Independence stable!

  4. Nick Pilkington 12th March 2014 at 5:49 pm

    Clients understand independent as being not tied to a single provider. My clients certainly are not worried that I may not have full knowledge of all the VCT providers but are happy that, if it is relevant I will recommend someone suitable.
    Restricted is a terminology that no on understands & it includes (by definition) anyone who is not independent. So the adviser who can provide advice on any company or product with the exception of VCTs is in the same category as an adviser selling one product from one company.
    This is totally ridiculous & is very confusing for the general public for whom this definition is meant to help.
    Everyone understood Independent & tied so why can’t we go back to that definition.

  5. Interested Observer 12th March 2014 at 7:39 pm

    Interesting article. In my role I visit all sorts of firms, independent and restricted. Most independent firms might not have gone over to restricted advice, but commonly they operate as restricted. They have two or three providers that are the ‘go to’ providers for a particular solution ….. So from the customer perspective what is the difference? What concerns me more is that a large number of firms I meet who focus on a specific area of advice, commonly investment and pension, despite promoting themselves as ‘holistic financial planners’. It is these firms that should be labelled as restricted as they clearly do not fulfil their agreed client obligations. By way of an example, I meet firms that put many millions under management each year but write a handful of protection policies, and show little interest in doing so. (I work in the protection sector).

  6. I sympathise with Interested Observer’s experience of “wealth managers” who are indeed not financial planners. The ad valorem business model creates that bias. Another prevailing bias relates to so-called “Guided Architecture”, eg Old Mutual’s WealthSelect. Independence, as Andrew suggests, requires it’s adherents to consider all available solutions, including limited architecture. If it is suitable, it’s usable.

  7. It seems to me that the crux of this article is “are you a product flogger or a financial planner?”. That debate isn’t anything new. IMHO we should all be financial planners with financial products just being the tools we use to meet a clients’ needs. As other posters have said, if you are not going to offer “Estate Planning” for example, then that should be made clear to a client as much as limited product options. Isn’t it right that a client/customer understands whether that planner is going to be able to advise them throughout their different life stages before they commence a professional relationship?

    With regard to the distinctions between restricted and “indy” i.e. product choices, it seems very clear to me that the restricted label needs to be sub-divided. Oh, I’ve just had an amazing idea! What a genius I am! How about we use titles like, I don’t know, “tied”, “multi-tied” and “independent”?

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