The retail distribution review is now live and so far it doesn’t feel like too much has changed. A little like waking up on the morning of 1 January 2000 and wondering if all the computer systems have crashed.
However, when opening the curtains it seems that a great deal is changing in the wider financial advice landscape. We won’t see the true fallout out for many months, although there is already a significant reduction in the number of IFAs; with many firms opting to become restricted. Research from VouchedFor shows that eight out of the ten largest financial advice firms now provide restricted advice – wow!
It is difficult to claim that AWD Chase de Vere has always been completely faultless. Certainly there were legacy issues relating to some product sales made between 2005 and 2007 when the company didn’t effectively integrate adviser businesses it had acquired. However, there have been further issues and in my experience, since joining the company in January 2010, what I have seen is an overwhelming desire to put clients first.
I work closely with our executive team and the decision making process in terms of whether we should be independent or restricted was very straight-forward. Our management team wanted to remain independent, our advisers wanted to remain independent and our clients wanted us to remain independent.
The only constraint would be if the FSA’s definition of independence was overly prohibitive or cumbersome. For a company of our size and resources it isn’t. Indeed, the FSA has been very sensible, fair and pragmatic about the approach it has adopted.
Given a straight forward choice between being described as independent or restricted, there is little doubt which each of us would pick. However, many firms have opted for a restricted status.
For smaller companies it could simply be because they specialise in a particular area or don’t have the resources to comply with the new independence criteria.
However, for larger firms it must be because they can earn bigger margins selling their own investment funds or products or those for a very limited number of providers. This is where most of the banks will sit and it has absolutely nothing to do with putting clients first.
I would like to quote two industry heavyweights:
Martin Lewis’ Moneysavingexpert.com website says: “The Golden Rule: If you’re using an adviser, always, always, always ensure it is an Independent Financial Adviser.”
Andrew Fisher, chief executive of Towry, quoted in an article in May 2010, “The retail distribution review should make a clearer distinction between advice and sales. The concept of restricted advice was flawed because it should be regarded as sales.”
While we don’t necessarily agree that all restricted advice should be regarded as sales, we do strongly believe that only by giving independent advice is an adviser able to act in the best interests of their client at all times and provide them with unbiased and unrestricted access to all appropriate advice and planning solutions. That is why we remain independent and fully intend to do so in the future.
Patrick Connolly is head of communications at AWD