The FSA has warned advisers about being over-reliant on outsourced investment research and says advisers should be prepared to challenge specialist recommendations.
Speaking at a Defaqto RDR conference in London yesterday, FSA technical specialist Rory Percival said while the regulator appreciated that advisers outsource to bring in a greater level of investment expertise, advisers still needed to apply common sense to the recommendations they receive.
He cited a case involving an IFA that will be made public shortly.
Percival said: “There was a firm that outsourced research on a particular fund and the outsourcing arrangement was with an investment specialist. The investment specialist filed a report to the IFA firm in this case but there were a lot of holes in that report.
“The average IFA, if they had engaged their critical faculties and done what an IFA is meant to do, which is to think about the nature of the investments they are going to be recommending to their clients, should clearly have seen there were a lot of deficiencies in that report and they were not able to rely on it, even they were not a specialist as the outsourced individual was.”
He added: “What firms need to ensure is they are broadly competent in the area they are outsourcing.”