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FCA: We are open-minded on changing indy/restricted labels

The FCA says it is “open-minded” about changing its independent and restricted advice labels, after admitting they are not well understood by consumers.

In its post-implementation review of the RDR, published this week, the regulator asked for stakeholders’ views on better ways to present information to consumers on the nature of advice services, noting one idea is to take forward a proposal from the Smaller Business Practitioner Panel to introduce a “simple label” to explain the scope of a firm’s advice.

Speaking to Money Marketing, FCA head of investment David Geale says: “Our research shows people did not really understand what they were getting.

“They tended to assume they got independent advice even from a restricted adviser. That says to me there is more to be done to look at how that message is put across, and that could mean we don’t focus too much on the labels, or we focus on a different way of explaining what people do. We are open-minded on that.”

Geale says the regulator could potentially scrap the restricted label and introduce a less stringent definition of independence.

Under the Markets in Financial Instruments Directive II, due to be implemented in January 2017, Europe has proposed a definition of independence which requires advisers to consider a “sufficient range” of providers’ products, and not the whole market.

Geale says: “There will still be a definition of independence because that comes from Mifid II. And anybody who wants to call themselves independent will have to comply with that criteria.

“But beyond that we’re happy to look at whether we keep the restricted label, and whether we do something different in terms of how people describe their services. We will need to do some proper research first.”

In January, the FCA admitted its efforts to clearly set out the requirements of independent and restricted advice were “not working”, but said that to change the labels would only create further confusion.


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Might this be a return to the venerable and largely satisfactory definition of independence, namely that whilst an adviser has access to and can advise on all RIP’s, s/he doesn’t examine and compare every single potentially suitable one available? In the real world (that strange place with which the regulator appears to be so unfamiliar), half a dozen client scenarios presented to half a dozen IFA’s may result in half a dozen broadly similar strategies but, for a whole variety of reasons, using half a dozen different providers.

    Maybe the regulator is finally waking up to the fact that perfection is an unattainable pot of gold at the end of the rainbow.

  2. Independent, Multi tied and tied would be good, hang on…….when have a heard this before?

  3. This is positive news and I agree totally with Julian above.

    Please please please FCA may this be a good lesson. Please in future listen to the people you regulate and save us loads of work and yourselves a loss a face. We are all quite open to good regulation and will help to achieve that aim. However we really don’t like silly things being imposed on us. Good effective regulation means agreeing changes with the industry to come up with solutions that work.

    Unworkable guff imposed from on high and dumped on the industry doesn’t work and is unenforceable anyway.

  4. Incompetent Regulators 18th December 2014 at 10:33 am

    Financial Advisers should be given the job of regulating the REGULATOR!

  5. Trevor Harrington 18th December 2014 at 10:49 am

    We need to be extremely careful here.

    There are many past actions of the regulator which have caused huge damage to what was previously a reasonably good and trusted name of the Independent Financial Adviser. The list of the regulator’s actions which have caused this damage is indeed long and miserable.

    Ironically, one of the regulators most damaging functions has been to constantly and regularly change our name, title or designation. In fact, as one who remembers the huge respect that the FIMBRA logo developed amongst the public, and subsequently the IFAP blue label, and all the others subsequently, I can also assure you of the hatred that existed in the tired and direct markets (Banks) for that success.

    There was no doubt that in those days, the regulator was directly and specifically “influenced” by the Banks to eliminate each and every one of those titles as they became well recognised by the public, and commercially successful as a result.

    We MUST NOT submit to this destructive gambit again, which on this occasion is being presented by FCA’s David Geale.

    Leave the titles as they are – DO NOT lobby to change them from the current “Independent” and “Restricted”.

    It is NOT the titles which are incorrect, it is FCA’s definitions of those titles which NEEDS clarification.

  6. E L Wisty (an only twin) 18th December 2014 at 11:13 am

    FCA “We’re open-minded …”

    Lots of pork outside my second-floor window.

  7. Well isn’t that just dandy, In the spirit of the FCA rules we changed from IFA to restricted in Jan 2014. It cost us just over £6500 to change all the stationary, compliance manuals signage, advertising etc. etc., So now they have decided the public don’t understand the concept and want to change it (what a surprise) – well to say I am hacked off is an understatement.

  8. “Our research shows people did not really understand what they were getting”

    My research shows regulators know even less about what they are giving.

  9. E L Wisty (an only twin) 18th December 2014 at 12:13 pm

    Of course, there are some organisations (a certain “upmarket” sales force comes to mind) that benefit from the prevailing obfuscation and will not be happy at the prospect of even a possible move to transparency.

    In relation to our favourite financial sophists, how can self-employed salesmen be allowed to get away with the “market term” of “Partner” (with the objective of conveying a sense of professionalism and entity, when they are not actual members of a partnership or LLP!

    Consumers have a right to know what they’re getting, and whether their adviser works as their agent, or has other motivations.

  10. @ Trevor Harrington

    Cant disagree with much of that – Its worth remembering that FIMBRA was a self (not statutory) regulatory body.

  11. This is a bit cavalier! What about the huge cost? If they do mess around with this again, then at the very least there should be a fee rebate for those firms who found themselves labelled restricted and under the mooted changes may well find themselves independent once more.

  12. I agree with Trevor H re no more name changes please and with Harry about a rebate and a head lopping due to the imposed cost. The FSA were. Told this would be amess and they ignored it. Is David Beale or anyone at the FCA who was there at the time going to fall on their own sword? No…., I’ thought not.

  13. I take two things from this article. The first is that this constitutes a public admission by the regulator that they have failed with implementing one of the core objectives of the RDR. The second is that MIFID II will trump everything in 2 years time anyway.

    My sympathies lie with Dr D.

  14. @james hurdman

    Thank you James for your consideration

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