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Consumers fail to grasp the difference between independent and restricted


Research commissioned by the FCA suggests there is almost no understanding among consumers about what is meant by independent and restricted advice.

As part of its thematic review into RDR implementation, the FCA asked NMG Consulting to investigate how well consumers understood the information provided in advisers’ disclosure documents.

NMG interviewed 78 consumers about the documents of eight adviser firms. It found consumers missing critical points about the scope of an adviser’s service, with few attempting to “decode” what restricted means.

The research says: “There is almost no understanding of the difference between independent and restricted advice. Most people believe all advisers, with the exception of those employed by the banks, are independent.

“Restricted is understood to equate to the pre-RDR concept of tied to a single provider, and there is no understanding of the continuum of advice options that exist between a restricted arrangement and independent financial advice.”

One respondent told NMG independent firms find the best product in the market, whereas restricted firms sell their own products. Another thought a restricted firm was independent as it provides details of the range of companies it works with as opposed to a sales agent for a particular brand.

The FCA says: “The research highlights the need for firms to make it clear to their clients whether they are restricted and how they are restricted, to avoid prolonging the assumption these firms are independent.”

Sovereign IFA director Mark Hibbitt says: “In all the consumer press, the recommendation is to go and see an IFA. The confusion about not understanding independent and restricted advice is absolutely down to the regulator.”

What consumers really think about disclosure 

“What does holistic advice mean? I thought holistic was to do with candles.”

“You always get suspicious when the type is small.”

“The payment is at the end – that is the real cracker. What do they make out of it? Have they got any gain in selling us this – it’s always hidden somewhere.”

“I think because they can’t call it commission, it’s going to be dressed up as a fee. I would be thinking they are getting a commission out of whatever the product is.”

“I wasn’t going to share this, but I actually fell asleep while reading it.”

Quotes taken from NMG Consulting consumer research


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There is one comment at the moment, we would love to hear your opinion too.

  1. If the FSA wasn’t so intent on perpetually buggering about with the definitions of adviser status, there wouldn’t be the confusion that currently prevails.

    Collegues to whom I’ve spoken who’ve switched to restricted status tell me that it’s not made the slightest difference to their business or to their client relationships. Just as was the case when they were IFA’s (under the old definition) they advise on various things on a WoM basis but on other things not at all. No one can specialise in everything. Unless, of course, they’re a superman or a very large firm with specialists in various areas.

    All that’s changed is that these smaller firms now have to call themselves restricted instead of independent but, in practice, nothing of any practical benefit or value has been achieved

    It all started with depolarisation which, according to David Severn, at the time working for the FSA and just spouting its oficial line, was because polarisation had passed its sell-by date. From that point on, it all descended into the muddle we have now.

    And STILL the FSA can’t stop tinkering and meddling with it and criticising intermediaries for not getting properly with the programme.

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