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Paul Lewis: ‘I would never recommend a restricted adviser’

Paul Lewis speaking at today’s summit

Host of Radio 4’s Moneybox and Money Marketing columnist Paul Lewis has doubled down on his advice to consumers to never use a restricted adviser.

Presenting at the Money Marketing Retirement Summit today, Lewis maintains restricted advisers are still often linked with a sales culture, and that the status was often unclear over service provided.

Lewis adds that restricted advisers may still recommend unsuitable esoteric investments.

Lewis says: “I would never, ever, ever recommend, interview, have on my programme, a restricted adviser, under almost all circumstances. The problem with restricted advice is there are two sorts: the ones who are restricted because they work for a company or they only recommend half a dozen companies, and the ones who are restricted because they only do one thing very, very well.

He says: “That distinction between the two halves of restricted advice, created by the FCA, is what causes the real problem. But because you can’t make that distinction easily, you have to say never, ever, ever go to a restricted adviser because they can’t advise you. Many of them are just there to sell you something.”

However, Lewis also acknowledges inappropriate recommendations have been made by some independent advisers, particularly around defined benefit transfers.

He says: “Those people blatently making money out of misselling defined benefit schemes to Port Talbot steelworkers and to others as well, were generally IFAs. Some were qualified financial planners. So how do I, who have always said to people, to protect yourself, make sure they are independent, find the best qualified, find the people who have put the effort in to being a financial planner, how do you advise people to find a good financial planner, when even at the peak of financial planning, some of them just can’t be trusted?”

What does ‘restricted’ advice really mean nowadays?

Based on the FCA’s findings, Lewis estimates £18bn could have been transferred into potentially unsuitable schemes. Lewis believes contingent charging should be banned.

He says: “The cancer of commission, the conflict of interest, that was behind [pensions miselling in the 1980s]. If you do one thing I get paid. If you do another thing I don’t get paid. So how can advice be trusted when it works like that?

Lewis adds: “So we come to the modern day and contingent charging….An army of introducers have sprung up like the skeletons in Jason and the Argonauts, sown by the dragon’s teeth of pension freedoms and rock bottom interest rates.

“They appear, unregulated, ruthless mercenaries whose only goal is to make a kill and take the money. Just as commission was the cancer at the heart of the financial services industry until the FCA stopped it…contingent fees create that fatal conflict of interest between client and adviser.”

Paul Lewis: Investing in gold

Lewis praises the pro-bono work of advisers who helped British Steel Pension Scheme members who were targeted by unscrupulous introducers and IFAs.

He argues just as there were fears that the end of commission and transparency would cause people to walk away from advice, but clients have in fact remained, cutting contingent charging would not have a significant impact on the numbers seeking advice.

He adds he remains justified in using the word “advice” around financial information for consumers despite not holding financial planning qualifications, arguing that there remains a distinction between regulated advice and more generic advice on financial matters, but this should still be labelled advice.

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Comments

There are 41 comments at the moment, we would love to hear your opinion too.

  1. Andrew Calder 7th June 2018 at 1:33 pm

    What an absolute stupid comment Paul … And Yes Paul … you have been a Financial Journalist long enough … and weren’t you one of the “suitable qualified Journalist” to write in your column back in the 80’s suggesting your readers to change to endowment mortgages and then back track ?

  2. I agree.. I would never use a GP if he is incapable of performing cardio-thoracic surgery, liver transplants, diagnose a common cold, perform a lobotomy, amputate a limb or remove a splinter from my finger. He must be capable and totally competent to perform any and all medical procedures required of him without referral to a specialist colleague. And of course he must be dirt cheap.

  3. Andrew Macintyre 7th June 2018 at 1:54 pm

    What a load of absolute tosh. Restricted/Independent debate on its own is nonsensical. You can get good or bad advice from either. It’s a made-up debate used for marketing advantage from one over another.

  4. Now what has SJP got to say about that?!!

  5. Julian Stevens 7th June 2018 at 2:15 pm

    You’re not supposed to recommend ANYTHING Paul, or anyone.

    • Duncan Gafney 7th June 2018 at 3:01 pm

      Indeed, Paul is not qualified or licensed as an adviser. This article also proves that he doesn’t even know what “restricted advice is” and should therefore never comment upon it.

  6. A foolish article which does him no credit. Probably qualifies him for an FCA directorship

  7. David Brookes 7th June 2018 at 2:32 pm

    Surely if pro bono-work is for clients that you are not charging then, to cover for that time you are cross-subsidising from other clients who are paying. Unless of course the advisers doing the pro-bono are retired and do not work for a living.

  8. Nicholas Pleasure 7th June 2018 at 2:47 pm

    As an IFA I recognise that almost all of my work could be done by a ‘restricted’ adviser. In the old days if you were a tied agent to Norwich Union it meant that you couldn’t recommend M&G funds, or Invesco, or anyone else.

    Today, most restricted advisers have access to pretty much exactly the same funds and products that I do. Sure, I can find some interesting things that they won’t be able to use but they will be of no interest to 95% of my clients.

    My problem with restricted advisers probably also relates to advisers working for large IFA groups too. That is, the pressure to perform, to make a sale, to increase your fee income. That’s where the potential problem arises.

    Those of us lucky enough to work in small business’s can usually take a longer view.

    • Philip Castle 7th June 2018 at 7:53 pm

      I’m with you on that Nicholas. I make a point of not disparaging restricted advsiers to a client as I may refer clienst to them for specific areas I don’t specialise in although I have the eprmsissiosn to do in many cases.
      I always make sure we have at least one staff member with an up to date first aid certificate(mine is out of dat) but I’d still step in and help if there was no registered first aider to hand rather than let someone bleed out just because someone who is not restricted is not available….. Paul = silly man.

  9. Duncan Gafney 7th June 2018 at 2:58 pm

    Paul,

    Well done for demonstrating that you do not understand what “restricted advice” is and therefore should never ever comment upon it.

  10. Richard Harris 7th June 2018 at 2:59 pm

    Paul Lewis who advised everyone to put their hard earned cash into Icelandic banks just before they crashed. I’m a restricted adviser who has turned away enquiries abut DB transfers because they’re unsuitable only to find a local IFA who is Chartered has moved them. Paul is grossly naïve about the industry because he’s “never, ever, ever” worked in it, just written about it

    • You may be thinking of Martin Lewis. And the advice to put deposits in Icelandic banks was extremely good advice in hindsight, because you got more interest than everybody else and were bailed out in full by everybody else when they crashed.

      • I think you’ll find that making a recommendation on the basis of an unrealistic interest rate followed by the hope of compensation on failure will look pretty dim on a suitability report

  11. Duncan Gafney 7th June 2018 at 3:05 pm

    I must admit the other thing I find funny about Paul is how he expects to be paid very large amounts of money for his unqualified, uninformed “advice”.

    Yet he appears to have a significant issue with highly qualified, highly skilled professionals, who are licensed and regulated to provide advice from being paid at all for their labours.

    I can only assume that Paul is a hypocrit.

  12. Bless you Paul. It is so much nicer to be able to complement you on your innate good sense.

    There are some silly remarks in defence of what is always a less good option. That is not to say that all IFAs are perfect, but given equal ability then independence must always be the preferred option.

  13. The trouble is Paul Lewis is completely prejudiced against financial advisers per se: You only have to read any article he has ever written about us. I would suggest it is very deeply rooted in his psyche rather than for any other truly financial reason in his self-appointed role as champion of the people. So his arguments are bias and flawed before he even completes the first sentence of his diatribes. He probably came from a background where advisers were treated with contempt and suspicion of their true motives and labelled in the same box as double glazing salesman, time share touts and door to door salesmen. The truth was back in the 70’s and early 80’s many advisers of that era did originate from a purely sales orientated background and for him s**t sticks and from his point of view our DNA can be traced back to that era and for that he will never forgive us. To him it is a fundamental flaw in ALL our backgrounds.
    Of course he is a total and complete hypocrite as he has no authority official or otherwise to speak on behalf or for the benefit of the public and it’s about time someone raised that issue and took it to book with the regulator as his statements are tantamount to giving advice without any official status other than his distorted views based on a fundamental dislike and mistrust of all advisers..

  14. If an Adviser has no morals or gives the wrong advice its irrelevant whether he/she is Restricted or Independent.

    It’s no good getting recommended the lowest cost or best performing product IF it is totally the wrong thing for you and you didn’t even need it at all.

  15. Let me just get this right, you cant be any good if you are ‘restricted’ because you are only out for the sale and because Paul cant be bothered to understand (or more importantly explain carefully) the difference between restricted, tied and independent you should only ever, ever, ever use an independent? But you can you can offer ‘non regulated’ advice without giving a long and complicated explanation of the difference between ‘advice’ and ‘non regulated advice’?

    There are lots of analogies (the GP being about the best), but would anyone seriously take a Ferrari to a Ford garage to be serviced because it’s cheaper? You may take your Ford to a Ferrari garage because it’s more expensive and therefore MUST be better, but not vice versa.

    On the contingent charging front, from what I am reading is that Paul thinks it is better to go to an independent adviser, pay a fee to be told to do nothing than it is to go to a restricted adviser on a contingent fee basis, be told to do nothing but not pay a fee? The independent has sold something, their time, but that is what the restricted advisers do according to Paul.

    Can someone please give me some advice on this!!!

    • Fact is Paul is idiot. The Independent bit refers to product selection not the advice. Its part three of the process, he understands nothing about part 1 and two , which if done properly doesnt always lead to part three.

      To be fair to Paul though, M M just use him as click bait.

  16. So Paul , picture yourself in late 2017 and an avid Moneybox listener who works at British Steel asks you who should I use for good advice around my Tata Pension and if I should transfer out- i’ve been speaking to 1825, SJP and an independent adviser called Active Wealth…….? I assume it would the latter every time?

  17. Justin – did you know there is a difference between an adviser and a planner?? I take it Paul does?

    • Philip Castle 7th June 2018 at 7:59 pm

      One begins with a and the other with p? Is this a trick question?
      I do both, but the word is pretty meaningless to clients until you show them what you do in both areas.
      The irony is that the clients value the planning (lifetome casshflow) more than the advising, but only the latter is regulated.

    • Now it is these sort of descriptions that are tosh:

      Planner Vs Adviser Vs Wealth manager.

      Most decent IFAs do all this. The ‘A’ stands for advice and they most certainly plan and most manage the clients wealth.

      The only important distinction is between Independent and the rest.

  18. I’m an IFA and I still hope that you get landed with the law suit that this article deserves!

  19. take the high road 7th June 2018 at 6:29 pm

    well said ALL..

    After reading this article from Mr Lewis, I was tempted to use the acronym FOADA…

  20. The point that needs to be remembered here, ladies and gents….

    Paul Lewis like so many (non regulated) can stand up and voice their opinion, and advice ( to the public) or pen their views, and guidance (to the public) pretty much without consequence…. “We cant”

    I don’t think Paul really concerns himself with damaging peoples reputations, I don’t think Paul concerns himself with getting things wrong or misinterpreting the facts, negativity and bad news sells (its click bait) a bit like the bad advisers miss-selling, they don’t concern themselves on the rights or wrongs just the sale ! (restricted or not)

    Make your own mind up, but there are many Paul’s in this world sat at desks with a pocket full of opinions and keyboard full of advice …… in olden days the doomsayers of the land were confined to a damp cave’s aside a mountain with only a goat for company ….ohhhh happy days !

  21. I’m not sure I see why everyone is getting quite so worked up about this article. Ultimately, it breaks down into a number of largely unrelated points, i.e.:

    Independent advice is preferable to restricted advice with everything else equal (more on this below).

    Unregulated investments are generally bad for most clients.

    Contingent charging is – at least in some circumstances – potentially very risky indeed.

    On the “restricted vs independent” argument, it seems that he is essentially saying that the current FCA categories are very unhelpful, in that you have independent advisers, who ostensibly start with a blank slate and find products that suit the client who has just walked in, and restricted advisers, who can have any number of restrictions without changing the classification. Or, to put it another way, you can have a restricted adviser who has chosen to use one investment platform but who is otherwise completely whole of market, while you could have another restricted adviser that has elected to use only 10 investment funds from the entire available universe and only invest into them via one specific (expensive) pension, ISA, bond, etc. Both of those are legitimately termed restricted advisers, and I imagine it is very for a prospective client difficult to know which you will be speaking to just from the categorisation. The good restricted advisers will set out the precise nature of and rationale for their restriction for clients to read before making a decision, while the bad ones will pretty much do the same, but will gloss over just how restricted they are (or worse yet will claim that it actually makes them better than independent). The end result is that the two look very similar, hence his decision not to recommend restricted advisers to people he speaks to. This seems a fair conclusion if you work on the basis that both types of advice are generally populated from the same pool of advisers (i.e. that most people in both pools will be qualified and honest, with a very small proportion of dishonest individuals in each category).

    What he is certainly not doing is stating that all independent advisers are better, or indeed good. It’s clear that Active Wealth are at the forefront of his mind when he talks about people being ripped off, and indeed they were (ostensibly) independent. In reality there are going to be independent crooks and restricted crooks, but on the assumption that you aren’t dealing with a criminal in the first place, it is still fair to conclude that your personal view is that an independent starting point is better than a restricted one.

    As for the people suggesting that a journalist can’t recommend an adviser – I hope you don’t take the same attitude with solicitors and accountants that want to recommend you to their clients! Or indeed with your existing clients who want to recommend your services to their contacts.

  22. Dear Paul, you have missed one important thing about me as a restricted adviser (and probably the vast majority of ex-IFA’s who chose to go restricted at the time of the definition change. I don’t (and won’t ) advise on film partnerships, EIS or VCT’s as they I find them to be too high a risk for my business (Sole trader working from home office). I charge fees if that is how the client wants to pay me, I can do contingent charging if that is how the client wants to pay me, I don’t care. I use 3 platforms and have no limitations on my use of investment funds within these platforms. I would really welcome your thoughts on why you wouldn’t recommend a restricted adviser when 99.9% of clients (in my view) wouldn’t and don’t notice a difference between me and a true IFA as defined the by FCA.

    • I agree with you Marty and seriously thought about becoming restricted pre RDR and dropped it from all our literature in about 2010 as a result.
      In the end I chose to remain Independant more for the fact it is a better desription of my way of thinking than for the range of RIPs I advise on. I do have clients we have advised to hold EIS and VCT too however. Other than that, highly likely we work in a very similar way to you.
      It would alomst have been better if the F-pack had come up with a new title instead of Independant when they chose “resticted” which does describe things fairly, it’s just that it is such a broad church and some firms don’t articulate the nature of their restrcition as well as they should.
      If we considered the reverse of restricted, shoudl we instaed be described as “Open minded” advisers rather than Independant?

    • Marty

      That’s disingenuous.

      1. Those investments you cite may well be off the scale risk for your clients.
      2. Most cases a good case can be made for advising the client NOT to invest in these. As you charge fees, presumably you would charge also in this case. I certainly did.

      My explanation of the acronyms were:

      EIS – Every Investment Sinks (Or nearly all)
      VCT – Void Capital Totally.

      If ever there was a case of the tax tail wagging the dog these are it. There are plenty of tax effective options without using these – which when you drill down often do more for the managers than the clients. I did an analysis of one of the Octopus schemes and wrote for an explanation – no response. I can only assume that my findings were accurate. In which case they should be wearing striped jerseys and a mask.

      • No Harry it’s no “disingenuous”. It’s a statement of reality and of fact.

        If you are honest about what you do and do not consider or advice upon, then the vast majority of those that call themselves “independent” are actually restricted, because they will not advice on the things that Marty listed.

        Heck in your reply, you’ve basically stated that you don’t advise upon them, as your preconceptions are they are “all bad” and therefore all clients should avoid them.

        So what you’ve actually done is just admit that in reality you are restricted (because of your pre-conceptions).

        So despite you always saying you are “independent” and displaying a very disparaging attitude towards those that are restricted (many of them just like Marty), the only difference is they are honest about what they advice on and your not.

  23. Andrew Macintyre 12th June 2018 at 4:26 pm

    Independent advisers can access certain products or pricing that a restricted adviser can’t.

    A restricted adviser can also offer certain products and pricing that the independent adviser can’t.

    So what?

  24. Not that I recall. Send me the cutting and I’ll comment.

  25. Robert Milligan 15th June 2018 at 4:19 pm

    All the time you have the likes of SJP in the Restricted list and vertically integrated sales forces, I totally agree with Paul Lewis,

  26. As long as I have been in the industry, good advisers give good advice and bad ones, bad advice. This is irrespective of their status.

    Good restricted advisers who know what they are doing and are clear where their advice stops and refer to an IFA when appropriate will be better than a duff IFA.

  27. Journalists should not be able to use the words ‘recommend’ or ‘advice’ – they are not subject to the same scrutiny or standards as registered individual, nor do they have PI cover for their poor articles (…or are they merely ‘guidance’?). I have personal experience of an article this morning that was factually incorrect and has caused harm to the business I work for. Who is holding this journalist to account (one of Mr Lewis’ colleagues btw)? Nobody.

  28. When is Paul going to differentiate between ‘advice’ and ‘product selection’? I thought he understood what the independent/ restricted moniker was all about…clearly not

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