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Editor’s note: ‘Independence’ matters far more to advisers than clients

Five years on from the RDR, and the independent vs restricted debate still holds an exalted position in the market.

Significant swathes remain fiercely evangelical in their belief that independence is a pipe dream, or that restricted is a recipe for disgraceful shoehorning.

Many of these people are unmoved by the dearth of conclusive evidence when it comes to client outcomes. Initial charges for restricted advice are marginally higher than independent but, at the same time, restricted advice was shown to be marginally more suitable than independent in a recent FCA review.

Yet the likes of Bellpenny (now Ascot Lloyd) and, last week, Sandringham, have still found sufficient cause to ditch the restricted moniker to go whole of market. For businesses with hundreds of advisers, that is no minor task, and represents a significant statement to the wider market that, while many sought solace in the looser regime of restricted post-RDR, the case for the prosecution is growing in strength.

Money Marketing‘s cover story this week: Will we see a march to independence?

When you drill down into it, the reason firms like Bellpenny and Sandringham have dropped the restricted label for independence has precious little to do with getting a better response from clients. It is because, with competition from all sides, from nationals, networks, consolidators, local firms and major providers alike, ‘restricted’ rarely sounds like the most appealing offer for a prospective adviser recruit.

Sandringham chief executive Tim Sargisson admits as much in our cover story this week. “Well, they are restricted” has become a useful battering ram for advisers looking for an excuse to beat up models they may not have liked anyway, like vertically integrated advice propositions run by product manufacturers. Forensic analysis might show the difference in underlying investment breadth to be minimal to non-existent.

There are still a huge number of small independent firms, who may pay for a support service provider, but are absolutely up for grabs when it comes to joining a network or national. Our healthy advice market still boasts more than 2,000 one-man bands, and another 6,000 planners in firms of between two and five advisers.

Data suggests a roughly 40:60 split between directly authorised advisers and appointed representatives, so networks and nationals have the potential to pick up not just hundreds but thousands of extra members. Trouble is, plenty just can’t see themselves dropping their proud heritage of independence overnight.

I do have some sympathy for the likes of Sargisson. Plenty of today’s restricted models are a world removed from their single-tied ancestors. But the fact remains that others are not. Advisers still have a job to dig beneath the skin of the proposition of any firm they are considering joining, regardless of independent or restricted status.

Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. I’m restricted (in my favoured platform) and I estimate my charges to clients to be lower than many of my IFA colleagues, not least because I don’t have to do so much research.

    And you’re right ~ clients really don’t care about the independence tag, of which there can be no better example than the resounding success of SJP.

  2. Justin, Spot on. Advisers need to recognise that consumers have little interest in labels; they look at people as advisers. The client is interested in a person who is suitably qualified and trustworthy, who works for a firm that has an absolute focus on delivering their financial needs.

  3. Christopher Petrie 19th April 2018 at 12:33 pm

    Potential new clients still ask if we are independent. I’m able to say “yes” which gives us an advantage straight from the off.

    I think it’s now 80% of financial advisers who are independent, so the doom-mongers from pre-RDR who said the banks would take over advice, or that everybody would go restricted turned out to be wholly wrong. As some of us at the time suggested they would be.

  4. Approaching 25% of the ‘first approach’ calls or emails we receive from prospective clients involve the question ‘are you independent’ at some point within the first 2 minutes or first couple of paragraphs.

    I would conclude from our empirical data that whilst a majority do not consider independence a critical factor, a significant minority consider it anywhere from important to a critical red line.

    The proportion does vary with time, and I have not identified why, other than chance.

    No one has ever turned down our service because we are independent.

  5. Robert Milligan 19th April 2018 at 1:19 pm

    Really! If a Restricted Adviser told the truth of their status, and explained the difference between the Restricted and Independent status, only a plonker would deal with a “Restricted” adviser, the fundamental problem is you have a bunch of Tied Agents running around pretending to be “Restricted, failing to really declare their enhanced remuneration structured wage slips. If you receive “ANY” enhanced benefits, remuneration, office allowance, free stationary, conventions, and practise buyout, and most importantly, a monthly car park space, then you are a “Tied Agent” and others are accountable ultimately for the advice. not the Tied Adviser.

    • Seriously? You can be independent and not offer advice on a number of areas, including DB transfers, long term care, mortgages, direct investments, a discretionary service and more. How often does that get explained to clients up front?

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