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Patrick Connolly: Why we are sticking with independence

Why we opted for independent status, not restricted

Patrick Connolly MM blog

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’ 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


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. Restricted is a stupid concept and should never, ever have been brought in. Limiting a clients solutions through provider or product focuses advice on those products available to the restricted adviser.
    I could not agree more Patrick.

  2. Good on yer Patrick. But quoting Mr Fisher rather highlights his hypocrisy, I believe Towry is restricted. Bit of a change of heart since 2010 no doubt. However your main point of putting the client first is apposite. It doesn’t chime with Towry’s model of own funds.

  3. Yet another ‘Independence is Best’ proponent who attemptss to distort what it means. Under the new FSA definition it’s about nothing more than whether you give advice on a restricted range of retail investment products.

    I can be restricted for the simple reason I won’t use UCIS or structured products. Other than that I could offer whole of market advice and more services at a higher quality than a holier than thou IFA.

    The problem is in the definition of restricted. Sure it includes the people alluded to in the article but it also includes talented specialists who could do a much better job than some IFAs.

  4. When we had Fimbra and Lautro and Independent vs Tied, the general public was clear as to what was being provided.

    I wish someone would come along and save us from these idiots ruining our industry, soon there won’t be a significant number of IFAs to even pay the regulators fees and it will become increasingly uneconomic an unprofitable to run an IFA practice.

    Early Xmas message – Bahh! Humbug!

  5. In my dealings with this firm over the last few years they have effectively been restricted all along dealing with a few providers they liked !

  6. Grey Area is very wrong. Both types of advisers can still abuse the system but restricted advisers not only choose not to sell UCIS and structured products but unknown to clients, other solutions. Only some of the tools in the tool box available to independent advisers are available to restricted advisers. That is worrying.

  7. Sam Caunt is very confused or uninformed.

    Restricted advisers are required to spell out the nature of their restriction to clients.

    All of the ‘tools in the toolbox’ are available to restricted advisers. There is nothing an IFA can do that a restricted adviser can’t if they choose to do so.

    It’s quite possible that a ‘restricted’ advisers can offer more than an IFA counterpart. For example, an IFA does not have to offer advice on equities, long term care or pension transfers. They don’t have to offer discretionary managment either. I could do all of these on a whole of market basis but still be restricted (simply because, for example, I won’t consider using UCIS). An IFA could offer none of these and still call themselves an IFA under the FSA’s NEW definition.

    There’s nothing wrong with peddling the ideal vision of what an IFA is (which I would probably agree with) but it’s not matched by the facts as they stand…

    I would submit that the problem is the new definition and not that you may be restricted.

  8. I echo Sam Caunt’s comments.

    Specifically, whilst being an IFA, we can still choose to not recommend UCIS to clients – it’s just that we need to be ‘willing and able’ to recommend them should we so choose.

    Personally, I do not envisage using UCIS for any of my clients but that’s very different to being unable to offer them.

    I had to smile last week when I read a Bank’s website which explained that their proposition was restricted and went on to explain why that was a positive….. I therefore continue to worry as to what clients have explained to then as part of initial disclosure.

  9. I think Ned Naylor (above) is correct in that the general public mostly understood the distinction between ‘independent’ and ‘tied’.

    The post-RDR situation is a classic case of what an unfettered bureaucracy can wreak and IMHO, this industry is going to broadly divide into ‘self-help’ for the general public and quality financial advice for the VHNW/HNW sector, via a drastically shrunken pool of advisors.

    If it is any consolation, in one sense, the FSA/FCA has sowed the seeds of its own destruction although a lot of ‘innocents’ will probably go down with it.

  10. I must deal with a different type of client to many of you, as they are not really that fussed about the need for independence, just what a product can and cannot do for them and most importantly, how much of their capital is at risk (yet to see or hear of a complaint from anyone who made money on an investment, apart from when it falls below any assurances given at outset!).

    In 25 years, I have not met a client/prospect who would be willing to invest to any degree in a UCIS or similar.

    Hindsight has a way of teaching us old-stagers that all that glistens is not gold, not that we get much credit from the modern-day innovators for this of course!

    Keep it simple and cover the tax-planning, etc. and you won’t go far wrong. Try to be clever and overly-sophisticated and…well, we know the rest!

  11. I am not independent because I won’t advise on Spread Betting even though we pick up the FSCS bill when they go wrong.
    Therefore I and every one else who does not advise on Spread Betting must be restricted regardless

  12. How does AWD’s adoption of a different platforms for different levels of client assets mean they can be “independent” ? Their clients generally get the same solution, panelled fund range and are “churned” onto preferred platforms from Fundsnetwork etc..

    I would suggest their service is more retricted than Towry, who at least call it as it is.

    AWD blowing their own trumpet about “quality” advice when they are the most heavily fined IFA in the UK is quite laughable. Also, a number of their “executive team” where the sales directors during the 2005-2007 period of high commission poor sales that got them fined in the first place

  13. Looking at these posts I see that even from the usually very well informed there is still confusion.
    You don’t have to use a UCITS or Structured product to remain Independent. Provided you have looked at it and have a cogent and compelling reason (documented or filed) for not using it, that still entitles you to BE and independent. You have considered it and discounted it as not suitable for your client. You have therefore looked across all of the market.
    I agree that these are murky waters. Am I restricted because I prefer not to deal with those who have no money? From what I have been advised from No 25 – no.
    I truly believe that there have been (and still are) vested interests who have purposely stirred the sh-t in order to foster their own ends. It really is not as tortuous as some like to make out. A bit of common sense all round please – and Viva Independence.
    Does this add anything?

  14. @Harry
    Agree – viva independence.
    Now I dont wish to further muddy the waters (Im vested interest free!) but from what I can see theres absolutely nothing to stop certain types of restricted advisers from doing EXACTLY the same job as an IFA, in every single respect. So, it really just boils down to the nature of the restriction, which can of course range from real product ties, to the simple exclusion of perhaps a complex product area where the adviser doesnt wish to or cant demonstrate a “mechanism” (FSA term!) for analysing adequately, or it might even be an IFA who simply wants to offer a lower priced service focussing on a simpler range of solutions and is upfront about it.
    This does seem to add little to client clarity compared to pre RDR, and Im sure all IFAs can put in place processes and product decision maps to avoid having to drop the name, but Id be depressed to think that the new image at large of an IFA will be someone who simply employs an instantly dismissive approach to whole swathes of possible solutions every single time without having any accurate current knowledge of specific products within that product category.
    There again, in the real world……..

  15. the nasty issue at both ends of the spectrum is that it will be restricted advisers who continue to run with in-house funds when they shouldn’t and it will be independent advisers who go way off piste when they shouldn’t.

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