As someone wisely observed, clients need clarity not a dictionary.
The regulator doesn’t have a good record on plain English, but the introduction of the term restricted to the regulatory lexicon was intended to bring such clarity, with the stark simplicity of stating that restricted advice is any personal recommendation which is not independent advice.
It is financial services providers and distributors, worried about losing clients, distribution or profits, who have muddied the waters for the clients, not the FSA.
The FSA is accused of changing its definition of independence: it has, but not in the way that many think. Previously, you could hold yourself out as independent if you offered clients the opportunity of paying fees and you provided personal recommendations on packaged products from the whole market or the whole of a sector of the market.
Think back. We had tied advisers, tied to the products of their own company or selling the products of one company. We had multi-tied advisers selling from the pre-determined panel of providers.
But we also had ‘IFAs’ who simply directed all their clients into their own in-house portfolios. We had ‘IFAs’ not permitted to go off-panel. We had firms advising clients on just one sector of the market, such as investments, under no obligation to disclose that restriction.
So, now we have a binary choice : independent or restricted. No Fifty Shades of Grey here.
It is crystal clear that there are advisers who because of their own choice, their network’s choice, their firm’s product range, their investment strategy, or their business model will limit (restrict?) their consideration of some sectors of the market when advising their clients.
And packaged products? Good advisers never restricted client advice to packaged products. You always talked about cash, debt, budgeting, cashflow, National Savings, tax and estate planning, lump sum investment trusts, state pensions and benefits, property, commodities, shares, discretionary investment management. No change there then.
My challenge for 2013 is this: for those advisers, wealth managers, product providers, networks and nationals who have adopted restricted business models, stop trying to hide your status and make clear that you are delighted to provide financial advice to your clients on a restricted basis.
Get your marketing and PR teams to extol the benefits of restricted advice and stop hijacking words like impartial (which is as open to misinterpretation as Independent for those who want to trade dictionary definitions).
Stop using words like “professional” or “qualified” as if they set you apart (they don’t – we’re all professional and we’re all qualified).
Start using the word restricted, clearly, up front, on your home page, on social media profiles, on openly available disclosure documents – otherwise your clients might think you have something to hide!
Gill Cardy is managing director at IFA Centre