With just over two years to go until the RDR deadline, it would be nice to have had all the details nailed down by now so that businesses could push on with the changes that need to be completed to stay in operation after December 31, 2012.
The debate that has been stirred up in the last few weeks over the differences between restricted and independent status and the attractions or drawbacks of each, or even what the different terms actually mean, amply demonstrates that confusion is still rife in the industry about the FSA’s new requirements.
Just as important as clarity on the regulatory requirements is the need for IFAs to be clear about how the new rules will apply to their businesses.
The last two weeks have heard the opinion from SimplyBiz that only 4 per cent of IFA businesses will choose the restricted label come 2012.
This has been countered by claims that this is based on a flawed understanding of what the term restricted advice means. Some say that many more advisers will actively choose to adopt the restricted label, even though the qualification and capital adequacy rules will be the same as independent, because it either suits the business model used or it is more cost-effective. Another option is to offer restricted advice alongside full independent advice within the same firm.
The potential size of the move from independent to restricted is sufficient for former Aifa director general Chris Cummings to suggest in last week’s Money Marketing that Aifa may have to consider admitting restricted advice firms into its membership.
Judging by some of the comments on the Money Marketing website, Aifa may have a struggle on its hands to convince some of its members that expanding the membership is the way forward.
But whatever Aifa and its membership choose to do, and almost regardless of the number of firms that do choose to adopt the restricted label, the fact the industry itself still cannot decide what the difference between independent and restricted advice is and how this will affect an advisory firm in practice means that clients will have almost no chance of understanding the difference.
If one of the aims of the RDR is to improve customer understanding of the distribution of financial services, it will fall far short of its intentions.