View more on these topics

FSA aims to ‘bust’ passive independence ‘myth’

Rory Percival FSA

The FSA says it will “bust the myth” that advisers who only recommend passives to their clients cannot maintain independence in its next RDR newsletter.

In an interview with Money Marketing, FSA technical specialist Rory Percival (pictured) says it is the process advisers go through to decide what is suitable for their client which determines independence, not the type of funds they recommend.

Percival says: “It is very possible advisers can only recommend passives to their clients and remain independent.

“If your start by reviewing the whole of the relevant market across actively managed, passive, OEICS, Etfs, investment trusts etc and then end up with a shortlist then you are independent.

“This review could end with recommendation of just passives which is fine. However, if you start with just a list of passive options then you are not independent.”

He says the FSA will provide clarity around this in its next RDR newsletter, due to be published later this month.

Pardigm Norton chief executive Barry Horner says: “Firms are obligated to do appropriate research on a client by client basis and as long as this is done then there is no implications to independence irrespective of whether the final choice is of passive funds.”

Forty Two Wealth Management partner Alan Dick says: “I think Rory Percival seems to be the common sense department of the FSA and I agree absolutely with what he says. Certain parts of the industry have tried to confuse this issue when it seems quite simple what the situation is. I look forward to the FSA reaffirming this in the newsletter.”


News and expert analysis straight to your inbox

Sign up


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

  1. Hold the presses! Common sense breaks out. And it’s Rory. Again!

    This was always going to be the outcome, it’s just taken time to get here.

  2. It makes perfect sense that, providing the firm considers all options, they can retain independence whilst offering portfolios which are solely made up of passive funds.

    Stating the obvious here, the whole ‘post RDR’ view of independence or restricted simply comes down to the starting point of the advice – is the adviser ‘willing and able’ to offer a whole of market solution or not?

    As I continue to say, providing full and clear disclosures are made to the client then everything should be transparent!

  3. I fear for Mr Percival’s future at the FSA, as he insists on speaking common-sense, is not a machiavellian politician and ….. worse of all, is popular with IFAs.

    Time for him to prepare his CV, me thinks!

  4. The only mystery here is how this myth got started in the first place.
    Nice to see the common sense approach again – but why is it only ever Rory who uses it?

  5. Never mind all that, he’s beginning to look really OLD!

  6. Hi David,

    The myth started when a junior reporter another publication spoke to a junior FSA person, when neither understood to question, let alone the answer. This then got published as policy, and those with vested interests jumped on it to “prove” that IFA’s must sell their funds / use their research! Same old, same old!

Leave a comment