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Keith Richards: Expertise trumps indy vs restricted debate

The line between restricted and independent has been blurred by the RDR but clients still appreciate experience and expertise.


Standing out from the crowd is more important than ever in the financial planning profession.

Since the end of August 2012 the Personal Finance Society has seen a 19 per cent increase in the number of chartered financial planners, with an overall total of 3,758 at the end of August 2013. Even more significant is the 25.7 per cent rise in fellowship over the same time, with 1,417 professionals now holding the FPFS designation.

These figures confirm that financial planners are continuing to recognise the importance of demonstrating greater levels of professional commitment to their clients as a way of differentiating themselves from their peers – particularly as the  ‘independent’ and ‘restricted’ labels have become so blurred from a consumer perspective. 

From the views of advisers obtained at PFS events around the country, it is clear that maintaining independent status is not necessarily as difficult as many industry strategists had first predicted, a view that I have publically shared for some time.

That said, in the FCA’s first thematic review on implementing the RDR, the regulator reported that 30 per cent of firms it looked at and which are holding themselves out as independent and had to be challenged under the rules. It should of course be noted that 70 per cent of firms seem to have met the regulators requirements without challenge.

However, following the publication of initial post-RDR findings, an increasing number of advisers have said they remain open minded but are considering a move to restricted to avoid the risk of future non-compliance; the majority, however, believe they will retain a whole of market proposition.

The consumer benefit of labels is becoming ever more questionable and therefore, as we have seen, financial advisers are increasingly moving towards qualifications and professional development in order to differentiate themselves.

This is because, as we know from other professions such as law and accountancy, chartered is increasingly recognised as a much broader professional standard and trusted by consumers.

Consumer research undertaken by Skandia UK last year found that 86 per cent of those asked found chartered status to be attractive, with 49 per cent considering it extremely attractive. When asked about independent versus restricted, 51 per cent said they would prefer an independent adviser, compared to just 1 per cent who preferred a restricted adviser.

Finally Skandia asked consumers what was more important, independent status or chartered status by asking individuals what they would prefer: a restricted adviser with chartered status or an independent adviser without chartered status. Sixty-seven per cent said they would prefer a restricted adviser with chartered status –illustrating that it is the expertise and experience of the adviser which really matters to consumers, not labels.

Labels were introduced under polarisation when advice propositions were described as either tied or independent, two major regulatory changes later and labels have become too complex to be a consumer benefit.  

As more independent advisers consider the move to restricted status due to risk of regulatory non-compliance, chartered and certified financial planner labels will increasingly become the differentiators. For those advisers which have moved to restricted status claim that it has had no negative impact as it is the individual and proposition, not the label, which the client buys.

Keith Richards is chief executive of the Personal Finance Society



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There are 18 comments at the moment, we would love to hear your opinion too.

  1. An independent adviser with Chartered status is clearly the most attractive option for consumers then?

  2. I thought CPD & exams were supposed to be about expanding ones knowledge in a way which is RELEVANT to your own development needs and those of your clients?
    If so, then most of the exams which would do that for me and my clients are additional Diploma exams and NOT Advanced Level Exams which are required for Chartered Status.
    As such I am sitting J07 again next week and will order J12 manual later today followed by J10 when I pass.
    Why would a client want to pay for brain surgeon to sort out blisters on their feet when all they need is a First Aider or even a little bit of TLC?

  3. Yes every new client I get now, asks what letters I have after my name when I tell them they are Dip PFS I get a snort of derision and a “not chartered then ?” (yes my tongue is planted firmly in my cheek)

    Please Keith get over yourself !!

    “These figures confirm that financial planners are continuing to recognise the importance of demonstrating greater levels of professional commitment to their clients as a way of differentiating themselves from their peers”
    I would argue
    “Professional commitment” is defined by ones actions, not by the letters after ones name, I see nothing wrong with advisers passing exams, I just get fed up with being told I cant have “professional commitment” if I choose not to ?

    As for the Indy V restricted argument ? well the rules are crystal clear on that one arn,t they !!! ppffttt !!!

  4. Quite right Martin. But why ignore Certified?
    I’m afraid Keith and the CII are at it again. Trying to blur the lines to support those of their members who are restricted. Of course competence is key, but as Martin has so eruditely put it if you are competent AND independent than it has to be a no brainer for the client.
    So CII, APFA and all others, please stop trying to fudge. We didn’t make the rules and if you are uncomfortable with them speak to the Regulator.

  5. As an IFA I totally agree with the point being raised in this article and confess that I am one of those considering a change of regulatory status but still maintaining a whole of market proposition. It is fair to say that my clients see the value in me and the value that I offer them rather than a title. I am not yet chartered but this is something I intend to achieve in the future.

  6. Phil Castle asks “Why would a client want to pay for brain surgeon to sort out blisters on their feet when all they need is a First Aider or even a little bit of TLC?”

    At one level I can quite agree, but here’s the thing: If it’s going to cost me about the same to see either a first aider or a brain surgeon, chances are I’ll go for the latter.

  7. A truism within financial services is that people buy people.

    Over the years I have found that, rightly or wrongly, consumers prefer to deal with a somebody they like and trust regardless of his ‘status’.

    This truth expands beyond the charted/certified argument into the tied v independent/restricted area.

    In short, consumers are far more likely to act on the recommendation of a friend than they are to check out what examinations the adviser has passed.

    Some people, and I include the regulator in this crowd, simply do not get it. Consumers are mostly indifferent to letters after the advisers name. Most do not care enough and simply want some affable fellow to sort out their problem.

  8. Alan is quite right in this respect. In all the time I have been in financial services not one person has asked about my qualifications.

    However I think Alan has missed the point. The qualifications are there for your own education and perhaps self-confidence. The old adage that education is never wasted still holds true. I still go to seminars and try and not only keep up to date but learn new things all the time. An exam is the method of testing yourself.

    I wouldn’t go as far as Alan in maintaining that clients just want an old friend to sort things out. They want someone who they perceive as having expertise in the topic. One of the ways I believe they judge this is by seeing that those who provide the advice ‘walk the walk’ not just talk the talk. In other words that the adviser is financially sound, has invested, undertaken or purchased many if not most of the products on which he/she is advising the client. That his/her own financial affairs are in good order. That experience and a degree of success can be demonstrated is also very germane. Examinations are merely the cream on the cake. I have often thought they are more for flashing to our peers and the regulator than our clients.

  9. That is a slant on what I actually said and meant, Harry.

    My point is that whilst knowledge is essential for advisers within the areas they operate it is not generally a prerequisite for attracting clients.

    In the heady HNW world is may be that potential clients undertake some form of due diligence but this is a rarity.

    When I broach the subject with clients and ask if they are interested in exam achievements and awards won they tell me no, they trust me and that is sufficient.

    Whether this is ideal is beside the point.

  10. Well then Alan, we can agree – again! This is becoming a habit!

  11. The PFS survey runs counter to several, including another for the PFS a year earlier, which found completely the opposite.
    Consumers are regularly quoted asking “why would you go to a restricted adviser if you could go to an independent adviser?”
    And the conclusion that qualifications trumps all is that a world full of Chartered SJP and Pru financial planners would be just perfect.
    But professional standing is not the same as regulatory status and there’s only one organisation I can think of that has worked this out and wants to stand up for the value of Independence.
    Go figure.

  12. Sorry to wet your umbrella Gill but I have found no evidence at all that the typical consumer even knows what changes have occurred.

    More pointedly, those that I speak to about the ‘new independence’ consider it a joke and absolute waste of effort on behalf of the ‘new regulator’.

    Consumers do not value independent – whether the old version or the tarnished version that currently exists – or the banks would not have sold/mis-sold in such great numbers.

    The Prince is dead, long live the frog

  13. Ah Alan, back to our usual.

    I could not disagree more strongly. Obviously we inhabit different worlds and presumably you don’t deal very much with professional connections and your clients are perhaps of the less well-off and less well educated variety.

    I find that professional connections and also individual clients go out of their way to seek an independent adviser. Indeed for many new introductions (I only work with introductions) it is one of the first questions asked. This applies to pre and post RDR.

    Where I do agree is that most haven’t a clue about RDR. But then as far as my clients are concerned the big three points have never changed. I am still independent, I have had qualifications for ages (although no one asks about that) and I have charged fees for over 20 years – something in which clients do take an interest and which rather underscores my independence!

  14. Are we surprised that when questioned, consumers are more likely to choose indiependent vs restricted (as per Skandia research)? It seems a no brainer to me. Whether they really understand the difference between the terms is a moot point – just the words themselves are far too suggestive to give anything other than the result Skandia saw.

    I agree with both the article and the comments from Alan – what the consumer really wants is knowledge that the adviser is trustworthy and competent. The most likely way they will know this will be by recommendation of some sort – the same way that most people choose a builder or an electrician. But in the same way that we choose these trades, if they aren’t Corgi registered (i know a) this is for gas and b)this has changed but you get my drift) then we would probably have severe reservations.

    So there are a number of elements at work, all are important and taken in isolation will generate a different view from a consumer but in the end, all combine to generate a level of trust that a particular adviser will do a good job and provided that is accomplished, the exact title or the exact qualification don’t feel to me to be the exact point.

  15. @ Harry Katz

    I’ve checked my files to see how many imbeciles, thicko’s, socially unaware or financially deprived clients I have.

    Not too many it seems. Maybe your theory is unsound.

    In fact, Harry, it is quite insulting.

    Clients do not ask for my qualifications, do not ask if and howm many awards I have won, they do not ask for referees or other indicators of quality.

    Truth is they assume that to be an adviser you have to be at least semi-literate, qualified to a certain level and capable or providing reasonable advice.

    I might add, if I’m ever in a beauty parade I tell the client not to bother as my time is too precious to be wasted on clients that pit one against the other for their merriment.

  16. “”Truth is they assume that to be an adviser you have to be at least semi-literate, qualified to a certain level and capable or providing reasonable advice.” Then a good few are going to be very disappointed.

    “I might add, if I’m ever in a beauty parade I tell the client not to bother as my time is too precious to be wasted on clients that pit one against the other for their merriment.”
    We can both agree on this point.

    Please don’t take my comments as insulting. They are just the plain facts as I see them. It is a generalisation that is often confirmed that the brightest in society earn the most. It might not be PC but it is invariably the case.

    I called them less well off and less well educated – not thickos. They may be financially deprived, but I couldn’t comment on that.

    It seems that your journalistic hyperbole got the better of you.

  17. Sorry, been sitting on Nic’s knee again.

  18. @Alan

    It takes a big man…. Thanks. Accepted with alacrity.

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