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FCA: Changing indy/restricted advice labels would add more confusion

The FCA has admitted its efforts to clearly set out the requirements of independent and restricted advice are “not working”, but says to change the labels now would only create further confusion.

At a press conference in London yesterday, FCA long-term savings and pensions director Nick Poyntz-Wright said the regulator recognises the confusion among advisers over the labels.

He said: “We hear from advisers wanting more clarity on what they need to do to be independent, and from restricted advisers on the way the label is perceived.

“We have done a lot of adviser workshops on this, but perhaps we ought to do something more widely to communicate our expectations, although from our perspective that would be restating what we believe we have already said.

“We have made best efforts to be clear but we have to recognise that does not seem to be completely working so we are going to redouble our efforts in that area.”

Asked whether the FCA has any plans to change the labels, Poyntz-Wright said: “We have not got any plans to do that at the moment. I think that would be even more confusing potentially.”

The FCA’s first post-RDR thematic review, published in July, raised concerns about firms describing themselves as independent when they are in fact restricted.

Asked whether the FCA expects to take supervisory action against any firms if this continues to be an issue in the second and third reviews, Poyntz-Wright said the regulator’s level of expectation of firms “will be stepped up” in the next reviews.

He said: “We are going to be saying you should have got this by now, if we think we have communicated something.

“But in one or two cases, where there is a flurry of what looks like confusion, we have to be attentive to that.”

The results of the second review will be published later this quarter.


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

  1. If each cannot be defined concisely in a couple of lines (and it blooming well ought to be possible) then there will always be confusion. There was yet another golden opportunity to say here independent is this vs. restricted is that – missed opportunity again!

    Nick I invite you to sign in here and publicly state a definition. Then it is sorted. Confusion will continue because despite the opportunity afforded by this article yet more column inches are filled talking about the confusion rather than trying to clear it up!

    It what the regulator rightly expects of us – so why don’t you guys deliver?

  2. Add More confusion ?? Once Upon a time it was so simple a child could understand. One was either Independent or Tied – then Blair, Brown and their boys came along……………

  3. The definition of independent and restricted is too confusing to change right now?

    Sorry, we have just setup a new company that is regulated by the FCA and when i spoke to our bank last year to open a new account i said ‘we will be authorised and regulated by the FCA’ to which the member of staff said ‘sorry, who are the FCA?’!!! And no this was not a call center i was talking, this was supposed to have been one of our many ‘managers’ and this was in August last year!! If the banks dont understand who their regulator is how is a lay person going to understand the difference between a company that is restricted (but can equally deal with the whole of market) and an independent company!!!

    Why has it changed? And i dont mean FIMBRA/PIA/FSA/FCA i mean the term independent/restricted/tied/network/appointed representative – and regulators wonder why people cant relate to financial services? You need a degree to understand who you are talking to!

  4. The Hound of the Compliancevilles! 14th January 2014 at 3:59 pm

    @ Matt above…

    Why has it changed you ask?!

    The previous categories were not always what they said on the tin…e.g many advisers would say they were independent (because they liked the sound of it in some cases) but did they advise on all types of investments…..No! They would favour this product or dislike that one, meaning there was a lack of consistency out there and generally misleading descriptions of a firms status.

    The new approach aims to clear that up by setting out what should be advised on if one wishes to be calling themselves independent (e.g the Retail Investment Products list), broadly any deviation from the list without a good reason (and a good reason might be a particular investment would never ever suit my customer base) means your restricted. Personally I think that is fairly Simpelz?

    Many banks have pulled out of the advice arena and where they do remain giving investment advice they are unlikely (due to their vertically integrated nature) to be independent (e.g they only sell their own wares), why is this important to some consumers?……. because they may want to get advice from someone who has a wider spread of investments that they can get access to for them giving them more choice…..choice is something we have all come to like and expect these days after all!

  5. @ the hound
    So some people lie! Now some restricted advisers are calling themselves independent most common culprit certain SJP reps!

    All that is needed is clear and appropriately policed definitions that don’t get changed every 5 minutes.

  6. This is not about advisers Mr Poyntz-Wright it’s about clients. Remember them? It is hard to believe the current definition of independence had any consideration for their ability to understand it.

    Firstly, they need to know the definition of a ‘packaged retail investment product’. Then they need to have a very good grasp of what constitutes a regulated activity (specific advice on a product is, generic advice isn’t). Then they need to understand that using the word ‘independent’ is only restricted for advisers (e.g. not discretionary, or generic advisers… unless they also advise…). Assuming they get this then it is indeed simple.

    Simon Webster is absolutely right that if it can’t be articulated in two lines then it’s failed its target audience (clients obviously, just thought I’d mention them).

    Anything wrong with saying you can only be called independent (regardless of activity, product, etc.) if you act as the agent of the client? Might as well make it a fiduciary duty as well given caveat emptor was effectively disposed of some time ago.

    Isn’t there a rule about ‘clear, fair and not misleading’? Perhaps that should apply to regulation… for client’s sake…

  7. ‘This is not any old confusion, this is Regulatory confusion’.

    Don’t you love it.’ Every little helps’…… to make matters even more confused.

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