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Chris Smallwood: Time to embrace the restricted advice label


When I joined the industry in 1988, the UK boasted more than 250,000 financial advisers and polarisation had just been introduced.

Over the years there has been one constant – that of independence.

But with the alternative to independence having variously been called ‘tied’, ‘multi-tied’ and more recently ‘restricted’, is it any wonder the consumer is confused?

I recall that when the regulator set up an RDR working group tasked with reviewing the labelling of advisers, this group
initially came up with the term ‘salespeople’ for the restricted sector. 

Many multi-tied advisers were up in arms about this term and eventually settled for ‘restricted’. 

It now seems the restricted advisers are not happy with that, either.

Some restricted firms appear – intentionally or not – to be clouding the issue and are arguably at risk of misleading the consumer.

In trying to portray themselves as something they are not by using terms such as ‘restricted whole of market’, ‘restricted plus’ and, the latest suggestion, ‘restricted universal’, it would seem there is a desire to position themselves as close to independence as they dare. This suggests that they ultimately believe ‘independent’ is the adviser’s preferred status in the mind of the consumer.

It is really quite simple: if you cannot hold yourself out to be independent then you are, by default, restricted. And if that distinction is embraced, restricted status might – eventually – sit more easily in the minds of both the industry and the consumer. Trying to masquerade as independent by using ambiguous and unhelpful monikers only serves to create confusion and mistrust.

We strive for consumers’ full understanding of what being independent means. We operate solely on their behalf, never favouring a particular group of product providers, and will always have the consumer’s best interests at heart.

Even the FCA has conceded that the meaning of ‘restricted’ may not be clear to consumers, as it is new terminology. 

So it is incumbent on all financial advisers to explain their status to their clients – what it is they stand for – and make clear precisely the areas or products they can and cannot advise on.

I suspect the restricted sector would like the two labels to be combined and for everyone to just be called financial advisers.

The RDR review group looked at many possible labels, so how and why would the industry now come up with anything supposedly more appropriate?

Restricted is what these advisers are and I think a consumer could hazard an educated guess that if you are restricted in relation to something then, by definition, you cannot do everything.

Chris Smallwood is chief executive of 2plan Wealth Management



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There are 15 comments at the moment, we would love to hear your opinion too.

  1. Seriously !!

    Are we still banging this drum ?

  2. I really do ot know why this is still an issue. I simply tell clients that I will not advise on FS pension transfers and do not advise on Film Partnershipls, VCT’s & EIS’s. If they fell these appropriate to their eeds I can refer them someone who deals with these. For everything else, “I’m yer man”. That means we can get on with doing the same job I have been doing since 1989. Clients really couldnt care less as 99.9% of them have no requirement for the above mentioned product lines and are therfore happy to deal with a restricted adviser. The problem is NOT in the mind of the clients, it is squarely in the mind of the adviser community. Explain it, forget about it and do what you are there to do – advise the client and connect them to appropriate solutions (thats “sell the right product” to you and me) to meet their needs. It really cant get any simpler than that, can it?

  3. Irrespective of what I feel about the label and I do feel the word ‘restricted’ is not a good choice, the real issue is about for whom one works and represents. This is why tied v independent was clearer as a tied agent clearly works for their employer/provider whereas an independent works for the client. It is a fact that one cannot faithfully serve two masters.

    The continued emphasis on product sales is outdated and the focus really needs to move to advice but that is where I believe only an independent advisers fits. Whether one is a specialist is not relevant, we don’t insist that surgeons are termed restricted because they do brains rather than legs do we?

    The philosophy and terminology are equally flawed simply because we’re not all doing the same thing!

  4. Independent or Restricted does not matter, providing the client is clear about the range of services available to them. If you are genuinely one of the very small % of advisory firms who are able to tick 100% of the FCA’s ever changing boxes on purporting to be Independent, then congratulations. However i feel sorry for you if you can only tick 99%, your clients still receive exactly the same level of excellent service you have given them over the past 20 years, yet you now have to adopt the same tag “Restricted” as a single tie adviser does.

    The FCA have got this wrong, not the clients, not the networks, not the nationals, not the advisers.

  5. Fair comment, however if you have a business with a couple of restricted models one being multi tie restricted advice and the other being just restricted advice I suppose you would want to differentiate between the two so it’s not quite so simple as one label fits all.

  6. Yet another fox who has lost his tail. Funny how it is the networks and big outfits who bang on about this.

    You turn if you want to – as the blessed Maggie was wont to say.

  7. I agree with Truthseeker above.
    Our regulators have consistently meddled with the meaning of independent to no-one’s advantage whatsoever. The issue remains in the public mind “do you choose the provider, where a provider is appropriate, from every company in the market or are you tied to one or more to the exclusion of the others?” That is the public perception of independence and no amount of petty stricturing from the FCA is going to change that. Surely there are more important things for the FCA to get its teeth into?

  8. But we also need to be independent of regulatory labels, especially where their is no descriptions of the goods attached. Perhaps its better to maintain independence of choice rather than action i.e. one remains free to select irrespective of the freedom being exercised. If independence of action is the judgment then it is false because “no one” can advise on the whole market, even non regulated products? There are different platforms, product providers and thousands of UK OEICS, all the foreign ones and Insurance Bonds as well to consider. Lets get the FCA to define what they mean by independent and then we can judge by that standard.

  9. There is a problem but it’s to do with the definition. The old way, as espoused by Duncan Carter, where it was who you worked for was clear and simple.

    Technically, being independent today simply means you are a product adviser – and a restricted range of products no less.

    An ‘independent’ adviser’ does not have to advise on shares, pension transfers, long term care, IHT and life cover. Nor do they have to provide discretionary services. Why? Because they’re independent…

    On the other hand an adviser like Marty might do all of these but because he has chosen to be up front and honest and not advise on Outer Mongolian OEICS, he’s restricted.

    Somewhat paradoxically the new definition of independence and the consequent ‘restricted’ completely fails the ‘clear, fair and not misleading’ rule. Firm’s adding words to ‘restricted’ is a symptom of this, not a cause.

    Restricted is now a meaningless term because of the sheer range of what it can cover. Independence is now meaningless because it has such a narrow definition. How delightfully ironic…

  10. What I find hugely annoying is the fact that on the FCA Website on the firms register there is no indication of the firm’s status.
    I have tackled the FCA about this and their completely unacceptable answer is that the firm has to make this clear.
    It is unacceptable because
    1. They made the rule so they should be seen to comply with it.
    2. The answer is fatuous because a client will only know AFTER approaching a firm – provided the firm is honest. If an individual just wants to research before making a selection it seems logical that they would go to the FCA website and this tells them nothing about the status of the adviser – other than if they are an AR.
    Does anyone think this is unreasonable?

  11. Patient Observor 4th March 2014 at 7:21 pm

    Surely it would be easier just to add FCA enforced wording to Client Agreements of either:

    ABC Ltd provides independent Financial Advice.
    ABC Ltd does not provide Independent Financial Advice. ABC Ltd provides advice from a Restricted range of products and/or providers.

    With no other options available! Confusion would be over, surely?
    If an Adviser does not like its tag, they could apply for a new one!

    Having worked recently for a large Building Society their ‘encouraged’ description of their Restricted status was to ensure their advisers explained that ” we could have chosen to offer any companies products but we have researched the entire market and decided to offer a restricted range of products from what we believe are the best companies and funds available on the market”.

    So you can see where the confusion could come from! 🙂

  12. Bring it on !! 4th March 2014 at 9:00 pm

    Why not have 2 types of adviser, you are either independent or non-independent.

  13. @Harry and @Patient Observer

    If only it were that simple but the way the rules are drafted it just isn’t.

    To hold yourself out as being ‘independent’ you have to provide this service to every single client you see. However, if you provide both independent and restricted services then you are technically restricted but you still provide independent services.

    When might this be the case? Take a full service investment management firm (yes, IFAs, there are other types of business out there) who also provides advice. Chances are that they don’t want to provide full financial planning to all clients or just want to provide pure investment services (excluding pensions say). Services it is worth adding that include advice on shares, debt securities, ETFs and ETPs – the sort of advice that most IFAs simply don’t do – is that restriction declared to your clients?

    Furthermore, a pure discretionary manager that doesn’t offer advice can call themselves independent but one that does the occasional bit of advice (but never on pensions) can’t. Where a client is introduced by an IFA to the latter they can refer to their service as independent. If the same client approaches them direct they can’t even though what they get is exactly the same.

    So, Harry, what you are asking for is simply not possible with the rules constructed as they are at the moment.

  14. @ Grey Area

    You might find that comprehensible but my small brain practically blew a fuse!

    I do know that (for example) Stock Brokers have to declare that they are Restricted (or at least the ones I deal with). Yes, I do agree that the way things have been drafted are an absolute shambles. If I go to the dentist I don’t expect him to offer proctology services.

    This whole thing has the footprint of PWC/E&Y/PWC/Deloittes. Ivory Towers the lot of ’em.

    In this instance the RDR is a horse designed by a committee and therefore looks like a camel. I do detect a level of embarrassment form Regulators when tackled on this issue as they themselves seem to have no little difficulty getting their heads round the more arcane examples.

    May we hope that before too much longer someone at No 25 will shout out that the King has no clothes

  15. Current labelling if used on foodstuffs would have people falling over from allergic reactions.

    Surely being independent of product is the ultimate test in short I advise you pay me irrespective, if it’s only if you buy a product or investment it then are you totally independent?

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