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Paul Lewis: FCA must rethink ‘restricted’ advice rules

Lewis-Paul

Less than three years since the RDR there is to be another review of financial advice. Here is my two penn’orth. At the moment anyone can call themselves a financial adviser. Even me (*ducks*). What I cannot do is call myself an independent financial adviser, as that term is regulated.

Of course, most readers of Money Marketing will be regulated financial advisers with an FCA number, which means you are regulated to sell regulated products, such as collective investments, pensions and loans. Tough rules determine how you can do that job and also cover you when you sell unregulated products.

But the rules separate out independent financial advisers from the rest, who used to be called tied agents, then multi-tied and now restricted. That is a useful distinction but it suffers from three problems.

First, some restricted advisers are not calling themselves as such. Okay, somewhere buried away on page 94 they will say they only advise on “x” or “y” and can only sell the products of “w” or “z”. But if you look at 1,000 websites you will not find the word “restricted” applied to themselves.

Independents are, of course, rightly proud of their status and use the word a lot. With this in mind, the only sign that an adviser is restricted is the absence of the word “independent”, often replaced with “comprehensive”, “distinctive” or “personalised”.

Any new regime that pitches independents on one side and restricted or tied agents on the other must demand full disclosure, such as “I am a restricted adviser” or “we have a team of 13 restricted advisers”.

That will help deal with the second point, which is that the FCA says it does not know and does not even collect information regarding independence. This means it cannot say how many of the 32,000 regulated advisers on its register are independent and how many are restricted. That must change.

Third, the label “restricted” in itself is confusing and needs changing. The present system allows a financial adviser to fail the independence test in two separate ways.

They quite rightly fail if they only sell the products of one or a small number of providers. If they do not cover the whole market they are clearly not independent and their advice will not lead to the best product for the client. They are not advisers but salespeople and should be avoided.

The second reason to fail is more contentious. A specialist in pensions, equity release or annuities (remember them?) can cover the whole market in their field. In specialising, they may well give the very best advice about the very best product in that area. However, because they cannot cover any other financial needs the customer may have, they are not allowed to call themselves independent.

When I advise that readers only ever go to an independent financial adviser I get complaints from specialist restricted advisers who may well be perfectly good at what they do and, they tell me, better at it than many general independents. However, they are denied that key descriptor.

This problem was created by the FCA and can easily be solved. Move this second category of whole of market specialist advisers into the independent category but make them say what their specialism is. What about “specialist independent pension adviser” or “independent equity release adviser”? They could then add the fact they are not able to advise in any other area or restricted in general insurance, for example.

But regulation needs more fundamental reform than fiddling with the present confusing system. At the moment, anyone can call themselves “investment expert” or “managing director, investment” without any qualifications, as long as they only sell unregulated investments.

Swathes of people, ranging from crooks to honest commission driven sales folk, can tell the elderly the great advantages of investing in wine, stamps, student accommodation or wind power. They can promise unachievable returns, use cherry-picked graphs of past performance, not warn that the past says nothing about the future and take unstated fees and hidden commissions.

My proposal is that anything sold as an investment producing a return should be regulated as collective investments are now. That means no commission and an obligation to be clear, fair and not misleading.

I would not just extend the perimeter to include investments either. My perimeter would enclose insurance, mortgages and loans, so all advisers or sales people would have to state they were independent or restricted.

I would extend some regulation to comparison sites too, so they would have to show clearly who makes what from every click and give genuine comparisons of all products, not just the ones they have a paid relationship with. Those relationships should be clearly stated on the first screen as well.

As I come to the end of my words, I can hear financial advisers around the country shouting: “Ha, I notice he says nothing about journalists being regulated.” Well, everyone who gives advice in a newspaper or on the radio is exempt from the rules about regulated advice.

The law is The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, article 54, which can also cover Twitter and social media in some circumstances. So it is not only journalists unregulated when giving advice in these public ways but everyone, including regulated advisers when doing that journalistic job.

And quite right too. Journalists are also regulated by the fact every word we write or say is in the public domain. That is true accountability.

Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programme. You can follow him on twitter @paullewismoney

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Comments

There are 38 comments at the moment, we would love to hear your opinion too.

  1. All of a sudden a waft of fresh air passes through my office…. and I have not even got a window open

    All must be well with the world, thank you Paul

  2. Hear hear !!! Restrictive is such an awful term to lable a highly qualified specialist adviser, it needs changing – and fast

  3. Excellent comments as always Paul.

  4. Paul

    I agree with almost all you say, but don’t pretend that being in the public domain is “true accountability”.

    If someone makes an investment because you indicated that it looked pretty good, then loses money, the loser may think you made a mistake, a bit of a Wally, but then move on.

    A regulated adviser could be on the receiving end f a complaint.

    Please don’t claim accountability where none exists.

    Ian Coley
    Partner
    Medical Investment & Advisory Services LLP

  5. Journalists are quick to call for regulation of other industries but want none of it themselves.
    They are regulated by public opinion they say – not a very high bar then! Given the Sun was the UK’s best selling newspaper.
    They also don’t take too much of a moral high ground when it comes to advertising revenue. At the moment I am bombarded with great deals at 12% guaranteed income from sea containers on telegraph and bbc web sites – but I will pass on that one thanks telegraph and bbc.

  6. Maybe a good place to start on this (as the FCA clearly wont do anything) would be to get the websites that help people find advisers to explain the difference between restricted and independent advisers and then to list them accordingly and to actually allow restricted advisers to be listed on their websites. Why restrict your income by not allowing restricted advisers to advertise on your site?

    It may also help if unregulated ‘experts’ stopped suggesting all consumers ONLY use independent advisers, spent a bit more time explaining the difference and then give ‘independent’ advice on both types of adviser.

  7. Paul, you make a fair point about the terminology ‘Restricted’.

    BUT….elsewhere in your article I would highlight that IFA’s do not “sell regulated products”.

    We sell ADVICE and, where necessary, intermediate to ensure our clients benefit from that advice. Both of these are SERVICES.

    It is that activity of advising that is regulated, and not necessarily any product(s) that may be the subject of the advice service.

    For example, look at the number of FSCS cases relating to unregulated products for which investors have received compensation because they had been recommended to invest in such by regulated advisers during the activity of providing regulated advice.

    On occasions, a by-product of an IFA’s (or Restricted Adviser’s) advice is that the client uses their money (or pre-existing investment) to acquire another financial product. Whether that be an investment, a protection policy, mortgage etc…..

    PLEASE, PLEASE, PLEASE, PLEASE, PLEASE STOP TALKING ABOUT IFA’s “SELLING” PRODUCTS. We don’t.

    Most advisory firms (Independent or Restricted) do not have any of their own financial products (save for the likes of the vertically integrated “upmarket sales forces” of this world). So, if we don’t possess any products in our arsenal we have no products to sell. They are not ours to sell; they ‘belong’ to the product-providers. The later may have a D2C division – and they DO sell their own products.

    BTW, being accountable is not the same as being regulated.

  8. “Journalists are also regulated by the fact every word we write or say is in the public domain. That is true accountability.”

    How does Paul square the common practice of correcting “errors” made by the journalist (as they frequently do) on the online version post-publication, with no acknowledgement that the text has been changed or that the original contained an error, with this idea that journalists are accountable because everything they say is in the public domain?

    There are some errors that journalists make over and over again, like stating that pre pension freedom you were forced to buy an annuity. The punter is often reliant on more knowledgeable readers posting in the comments section to correct such errors. “True accountability” seems to have bugger-all effect on journalistic accuracy.

    Clients are able to scrutinise what we say in exactly the same way as journalists’ articles. Although our letters to clients are confidential, I am sure none of us would have any problem if a client showed one of our suitability letters to friends. Or even posted one on their blog for others to comment on. So what is this special accountability that journalists are subject to that we aren’t?

    (The rest of the article I largely agree with. Except the tired old idea that “specialists” shouldn’t have to describe themselves as restricted. If you only advise on pensions then you may not be able to tell a client that he shouldn’t actually put money in a pension. Clients are entitled to know this.)

  9. Restricted advisers are sales people & should be avoided? How can you make such a sweeping statement ?! Ask independents how many products & funds they use and you’ll find they use their favourites over and over again. Whilst research will show they’ve considered the whole market systems such as de factor can easily be worked to spit out the same end result. I used to be independent so I know how it all works. The measure shouldn’t be restricted or independent but chartered or not!

    • the actual difference between restricted and independent in the real world is slim. Most IFA’s are creatures of habit and tend to work from “panels” and at most a couple of platforms.

  10. Sensible ideas but a few points :

    – Independent FAs do NOT SELL products, we sell our time and expertise and often products are not involved
    – Regulating all investments would be a nightmare, so anyone selling a home could be caught in this as it may give an investment return – keep it simple, consider regulatory approved products.
    – the last point really is quite pompous I’m afraid – being in the public domain is not a form of regulation , no where near close to it, and its a supposed moral high ground journalists often clamber on to. Many of us have worked with journalists who simply ask us for copy which they then put their name to.

    Overall a sensible debate and some good solutions suggested given the mess the FCA have made of the definitions of advice

  11. Take The High Road 10th September 2015 at 2:51 pm

    Interesting comments both from Paul and all posts regarding this.

    I’m just throwing one out there….but I think the FCA was probably right to water down the status/importance of being ‘Independent/Restricted’ and I don’t necessarily agree with Paul that they need to rethink ‘restricted advice’ rules. Rather than this, I perhaps think the FCA should rethink the rules on ‘Independent financial advice’.

    ….and before someone sticks one into me, we all sell things; whether this happens to be our services, a product or even a particular specialism you are into!!

    For far too long, I have(and continue) to see many so called ‘Independent Financial Adviser’ firms throw people down what is nothing other than single/VERY restricted advice route through the use of a single centralised investment proposition…now how does this qualify a person as being ‘independent’? I also know many so called ‘whole of market; restricted advisers’ who use many more investment solutions than many IFA’s so its little wonder that both the public, the FCA and journalistic types get a little confused over all of this.

    Looking forward to seeing the engaging replies on this!!

  12. Taken from the FCA website, definition of a restricted adviser:

    “The adviser can recommend one or some types of products, but not all retail investment products.
    The adviser has chosen to focus on a particular market, such as pensions, and considers products from all providers within that market.”

    Some firms choose to specialise in certain areas eg. specialist pension advice for HNW clients. When it comes to advising client’s on these matter’s they most certainly do not flog products and always act in the interest’s of the client’s rather than their own or the product providers. These adviser’s always take a whole of market approach, but because of the cack-handed way the FCA has defined different categories of adviser it can actually create a false impression of the professionalism and qualifications/knowledge an adviser actually has.

    Paul has identified this as an issue in his article but I am quite annoyed that whenever we see him on the BBC he always flags up IFA’s. Probably because it’s too complicated to explain some restricted advisers are better qualified and knowledgeable than their IFA counterparts.

  13. John Hutton-Attenborough 10th September 2015 at 2:54 pm

    “Independents are, of course, rightly proud of their status and use the word a lot.”

    Absolutely.

    If you were proud of the word “restricted” there would be no need to use other words such as “comprehensive/ personalised” or “restricted- whole of market”!

  14. Take The High Road 10th September 2015 at 3:29 pm

    @J Hutton-Attenborough

    I don’t think any ‘restricted’ adviser is proud of the word but that’s the route they’ve chosen. Maybe they are just being more honest about their status in only using a handful of companies – much like many IFA’s I’ve met!!

    My point is why did the FCA think it was smart to come up with such a convoluted/ambiguous description in the first place?

    Surely, it was far simpler to have ‘tied-agent’ or IFA….that was pretty straight forward, wasn’t it?

    ….additionally, for what it’s worth I would like to actually see the FCA go out and find an IFA who does genuinely select and recommend products and services from the whole market(and put aside any of their relationships with chums who work at the large insurance companies who take them for a nice lunch every now and again). If this started to happen, I suspect many would then have to rethink their status…..and promptly change themselves to ‘restricted’ forthwith!!

    • Assuming you do not work in the industry this is exactly the reason the FCA have failed with their IFA/restricted adviser model. The general public really don’t know the difference at many levels.

  15. Good points from Paul however I agree with posters above that there continues to be a misnomer that IFAs sell a product whereas the vast majority are selling time / experience / a service etc.

    Disclosure is a massive issue – IFAs are often accused of taking a moral high ground but the fact of the matter is that being IFA is more onerous than being restricted whilst restricted advisers hide that fact away or spin it (as also outlined above).

    The fact that commission still exists in pension and investment markets creates clear detriment and whether there will be an appetite to remove it from mortgage and life cover is a big question: I can only assume that the FCA sees commission as a ‘bad thing’ but for some reason doesn’t have the desire to remove it totally from the market.

  16. Just today I confirmed to a new client that she was wise to hold Premium Bonds, I cannot imagine that anyone paid by product sales would have left the money there. She had never seen an IFA before, was a bit concerned about my published rates, but came away delighted with the outcome of an holistic planning discussion, no products mentioned.

    The message about quality independent advice should be the priority, then consumers would understand that that is what they should be looking for. I fear that there are too many vested interests stopping this from happening, hence the fog surrounding the different advice channels.

  17. Take The High Road 10th September 2015 at 4:33 pm

    get away….IFA’s still sell stuff – be it a product, service or whatever….nothing ever gets done without a sale of something(the sooner we all recognised that the better!!)

    Some IFA’s do need to get off the moral high ground(and stop wining about such matters!).

    I assume you are referring to the likes of SJP when you talk about ‘restricted’ – and their lack of disclosure!! I would agree with that however, you simply cannot tar the whole of the ‘restricted’ adviser market with such a narrow view as many ‘restricted’ advisers I know have to jump through just as many hoops as most IFA’s!!

    ….and many offer more services than a lot of IFA’s(well, the ones who still maintain they are independent, when they are clearly not) and there is a lot of them about as far as I can see!

  18. What a fantastic argument – the moral high ground of the ‘independent’ adviser and the journalist whose work is in the ‘public’ domain. From what i am reading here the IFA is ONLY in this for the virtue of ‘helping their clients’ and has NEVER sold a product in their life (they sell their time and expertise). The journalist is ONLY in this to educate the public with their vast knowledge of the things they have dealt with.

    lets get a couple of things straight here. First ALL advisers, whether independent, restricted, tied or otherwise are viewed by the public as being commission hungry sales people in the same way bank staff are/were viewed as being high paid commission hungry salespeople (we all know the difference). Equally the ‘holier than thou’ Paul Lewis is simply a journo after a story in much the same way as Max Clifford, Piers Morgan and any other low life paparazzi are. The difference is that Paul wouldn’t want to be lumped with Piers Morgan or any of the other low life gutter press because he is above that and is a respected journalist (in his opinion). The thing he forgets is that he is still a journalist and is there to sell advertising – newspapers dont make money because the journalist wrote a great piece they make money because they sold a load of advertising. Equally advisers dont make money because they ‘helped’ someone in trouble, they make money because they got paid for selling a product. Yes you SOLD that product, you may have looked at many different products and providers but at the end of the day (when the cheque was cashed) you SOLD a product.

    I can see why independent advisers are keen to keep the ‘independent’ in adviser, but let’s not keep bashing the restricted advisers simply because they specialise (accountants do, as do solicitors). And lets not forget that just because you specialise doesn’t mean you are getting commission. We only charge fees and we only get paid from fees, but we are still restricted (by choice). We aren’t independent because it’s easier to be so, we are restricted because it’s less onerous to do so, we dont want to deal with £20 a month ISA’s or £5 per month LTA contracts, so why should we even begin to consider them when our client base doesn’t want to be SOLD them! They come to us for a reason, we help them with what they want to do and dont baffle them with a whole ream of other options that they feel are being forced upon them.

    If it were that the client was the ‘only’ reason we were all in this business then this conversation wouldn’t be happening, however (and a few more advisers need to own up to this) we are all in business to make money. I dont believe there is an adviser in this country that is making a living out of selling their time only and never signing up a single product, if they are, what the hell are you doing being regulated? You aren’t selling any regulated products so why not become a journalist??? http://www.icansaveyoumoneyexpert.com – easy £25 million in only 10 years!

  19. Take The High Road 10th September 2015 at 4:49 pm

    MW – excellent; the best post of the day!!

    well done…

  20. The whole definition is silly and needs changing. It could be so simple…Independent Advisers must be free from provider influence. They must not be owned or controlled by a product provider in any way. They can then choose to be specialists without losing their ‘independent’ status. Many of us rarely recommend or implement products.

    Restricted advisers are owned or controlled by the provider of the products that they recommend. That’s easily understood and the FCA needs to sort it out promptly.

    Let’s agree that there are great independent and restricted advisers out there and also many in both camps that are less than great.

    BTW, is anyone else enjoying the regular appearances of ‘Notorious Ladies Man, Paul Lewis’ in Dead Ringers, or is it just me?

  21. One of the key points made in these posts and one with which I agree entirely is that an awful lot of advisers still calling themselves whole of market/independent are in practice no such thing because they only use, for example, two or three platforms. Were they members of a network, they’d find themselves forced to undertake a funds-specific comparison of every platform on the market not just initially but every year subsequent. Nightmare.

    I challenged our network about this and they sent me a copy of the relevant section of the FCA’s rule book which states unequivocally that any consideration of suitable products or platforms must be COMPREHENSIVE. That leaves no room for flexible interpretation ~ it doesn’t mean just a favoured two or three, it means ALL OF THEM.

    So the whole WoM vs restricted debate is a crock, for the simple reason that a lot of FA’s are still calling themselves Independent/WoM when in reality they’re no such thing. Me, I’m restricted in the areas I choose (e.g. preferred platform) and WoM in others. However, I can also advise new clients with existing investments on platforms other than my preferred one.

    As a result, I don’t have to waste hours and hours every week undertaking laborious and pointless comparisons which may point to using (or perhaps switching to) a company with which I want nothing to do. It hasn’t hurt my business one iota and though I would in no way wish to be compared with SJP, it certainly hasn’t limited their success.

  22. A what about sites like Money Saving Expert and people like your self Paul giving advice to millions under that title of Journalists.

    Whether an IFA or Restricted at least we are regulated – I thought it was the job of a journalist to report NEWS not sell products like some Journalist’s sites!

    I do agree with your comments but I would also call for greater controls of Journalist and an end to the opt out under the FSMA 2000

  23. A couple of points;

    Firstly, if journalists were accountable in the same as advisers, then they would be more careful before opening their mouths.

    Secondly, there is nothing wrong with advice from a tied agent. If you want retirement advice that is what you get.

    Their terms of business will say they can not advise on a whole of market basis.

    The document is a couple of pages.

    An. IFA provides a better service and costs more.

    It depends what the customer wants to pay, and equally importantly if the likely gains for THAT customer justify the additional cost.

    For the man with the 10K pension fund, the cost of advice is crucial.

  24. Bless you Paul

    I and many others have been saying this for years. I even had to resign from AIFA (who became APFA) because they lost the faith and were promoters of the drivel that we were all advisers and if we were to have a collegiate structure the Restricted guys would feel second class. Too right – that’s exactly what they are.

    I fervently wish that the Regulator take heed of your views.

    I too subscribe to the remark by Mark Coomber – IFAs advise. The fee is payable whether or not the client buys. The IFA covers ALL the financial ground and is therefore the only adviser who is able to offer truly holistic advice.

    I have read the bleatings from the second tier and from my own experience people become restricted because they are in the main too idle to do the work necessary to be independent, or their network finds it expedient and allows them better control of the drones.

    I don’t have an axe to grind as I am no longer an IFA having sold my business and relinquished my permissions, but even before entering and now leaving my IFA career I have always firmly believed that the only course is independence – both in finance and in life!

  25. As a restricted adviser who ALWAYS puts my clients’ needs and financial welfare first, is JUST AS QUALIFIED as the majority of my independent counterparts, OFTEN TELLS clients that they should see an IFA if I think they need something only an IFA can offer and NEVER makes a recommendation which I wouldn’t give to my own mum, I am extremely offended by the rubbish Lewis has come out with here. Shocking stuff……
    I also do not agree with restricted advice never being the best for the client. I agree it MAY not but I’ve lost count of how many times a provider on our panel has ended up being the best when also looked at from a WoM perspective by an IFA. And investment-wise, would every IFA recommend the same fund to one client? No, of course not! Yet surely only one can later be called “the best”. I’d like to see a retraction of some of your comments towards restricted ADVISERS Mr Lewis. Obviously that won’t happen but at least I feel better now having got this response of my chest 🙂

  26. I often wonder why our industry has been cursed in the way few others have been. All this fuss about different terminology, different names. All this differentiation and segmentation. The removal of the option for customers/clients to pay for advice by factoring. Regardless of the lofty motives of giving customers clarity and to professionalise the field of advice, the end result of RDR and previous and subsequent regulation has been to create an environment where advisers/salespeople seem to charge inordinate amounts of money and write interminably long self-defence documents when giving advice to our clients. The absence of a long stop for advisers and the ability for customers to complain about things retrospectively and to selectively remember what they were and were not told means that everyone ends up paying for us to write novels to try and close off every possible avenue of potential future complaint. So in the end regulation designed to protect clients has led to them being charged far higher fees to fund our future self-defence motivated suitability letters. Unlike most other fields, “good” investment advice which complies with all regulatory guidelines can end up producing worse results than bad investment advice (and sharp practices) which perversely, can lead to clients who have invested in the “wrong” investments enjoying better outcomes. So when all is said and done our industry has ended up with a disastrous regulatory framework which has inflated the cost of advice charged to clients. And a situation where the surviving good advisory firms end up paying massive unjustifiable, immorally high levies to pay for the sins of their erstwhile colleagues who have left the industry. And where the Chancellor of the Exchequer donates the receipts from some massive regulatory fines to pay for populist public charities, so that the fast diminishing number of advisers are left to pay ever more in levies. I haven’t used the terms independent or restricted, regulated or unregulated because they are just made up labels. The real sadness is the environment in which we are forced to operate. And the inability for the average man and woman in the street to have access to cost-effective affordable financial advice. Great shame.

  27. The problem with regulated IFA’s is that a lot of them are not very good.It’s like seeing a sign outside a pub saying “delicious hot food” and when you get it, it’s anything but.

  28. Surely the term ‘Independent’ or ‘Restricted’ is a product descriptor? Not an ADVICE descriptor? Whether someone gets their advice from St James Place or Joe Bloggs Independent the advice should, largely, be the same. Personally I still think you’re barking up the wrong tree.

    • Correct Russell, the terms are all about product. No surprise the public don’t get it when it would appear many advisers ( and former advisers) don’t understand……

  29. Julian Stevens
    So the FSA handbook states that consideration for each client should be COMPREHENSIVE, and your network interprets that to mean that you should review all platforms for each client each time you make a recommendation SOLELY ON THE COST OF THE FUNDS SELECTED! Do you not see how (oxy)moronic that interpretation is?
    Most IFA’s use a selection of platforms precisely because they have conducted COMPLETELY COMPREHENSIVE research into not just the price of the funds, but costs of trading, reporting, client access, product offerings, support; and how these all fit into their advice model in order to keep overall costs to clients at a reasonable level.
    Otherwise, you would get the perverse result of advisers stating to a client “I have recommended Platform B for you this time instead of Platform A because the costs of the funds are 0.1% per annum cheaper, but because Platform B does not do x, y, and z that Platform B does, we will have to charge you 0.25% per annum more to do these tasks ourselves”!

  30. Sorry Paul, but the difference between independant and restricted can be wafer thin and in many cases either non existent, or even in some cases actually backwards.

    Sorry IFA’s, but none of you, review the entire market each and every time you make a recommendation to a client, because you don’t have the time, you all predominantly use your preferred providers to give your clients the solutions they need, other than in very rare exceptions, so the reality is, that actually more of you are mostly restricted most of the time.

    A restricted adviser, using a panel, can be highly restricted, if the panel is not based on genuine and updated research and is more about the bottom line and commercial arrangements, than what is the best product.

    However likewise a restricted adviserory firm that reviews the whole market every say 3 months and changes their preferred providers, funds etc, dependant on what is actually the best in the market, is in many ways better than an independant, simply because they genuinely do review the whole market frequently and work with the best providers etc.

    So its all smoke and mirrors tbh and what is “best” depends entirely on the specific company in question and the “title” has got the square root of **** all to do with it.

  31. @Duncan Gafney

    I think you are being myopic or purposely obtuse. What about a restricted adviser that can’t or won’t do life assurance or any other restriction he/she cares to lumber him/herself with? This is an impediment to holistic advice.

    I see that some restricted advisers on this site are getting very self-righteous. While I will agree that within their narrow confine a restricted adviser can, and no doubt some do, give excellent advice and that an IFA equally often does give rubbish advice that still doesn’t detract from the fact that the IFA offers the whole deal. It is up to the client to find a decent one.
    In the same way if you went to a dentist there is no guarantee that he is any good, but that doesn’t mean that you would go to a vet instead. You would try to find a decent dentist.

  32. Really Harry…? You’re comparing the difference between a restricted and an independent adviser as being like a vet compared to a dentist??
    And tbf, being self righteous is usually something indulged in far more by certain (not all) IFAs

  33. Kevin Neil ~ I didn’t suggest that cost is the SOLE arbiter in selecting a platform. It’s just the starting point. And that’s where it all becomes so impractical. I recommend this particular platform because, although it’s not quite the cheapest, it does x, y and z. How do you do that from a selection of something like 40 platforms? I don’t believe anyone can possibly know all the relevant parameters of 40 platforms, not to mention keep up with all the changes that are constantly being implemented.

    The task of comparing every single one not just on costs but all the other things you mention (and having to do it again every year) is such an immensely laborious, time consuming and therefore costly exercise that, as others have suggested, I sincerely doubt that many IFA’s actually do it. Most use just their favourite two or three and have little if any detailed knowledge of most of the smaller ones, several of which are decidedly fringe offerings that many people anticipate being absorbed by the bigger players anyway as they fail to achieve critical mass of AUA. I’m certainly not inclined to do so ~ were I constantly trying to keep up with and compare the constant stream of tweaks and cost trimmings, I’d hardly have any time left to do anything else. Frankly life is too short. In addition to that, you can never really know what a particular platform is like to use until you actually do so in practice.

    I’ve spoken to more than one practitioner who recommended Platform A because it seemed to tick all the right boxes, only to encounter so many problems of one sort or another and so many problems getting those problems sorted out that eventually they’ve had to go back to their client and, with apologies for all the bother, confess that the only way out of it all is to switch to another. More work, more aggravation, more costs (which can’t be charged to the client, because it was them who recommended Platform A in the first place). On top of that, you may well run into the problem that one or two funds in which they’re invested on Platform A aren’t available on Platform B. The headaches are endless.

    Being restricted, I can say to my clients: This is our platform of choice, these are all the reasons why, we know how it works, we know that it DOES work and I can take on investments as modest as £20,000, which many IFA’s have declared they now can’t or won’t. If you absolutely MUST have a comprehensive analysis and comparison of every platform on the market to save 0.25% p.a. and you’re prepared to pay for that very considerably more than what I charge, then my business model isn’t quite what you’re looking for, but thank you for your interest. It hasn’t happened yet. Most people I see don’t even know what a platform is and those who do certainly aren’t interested in paying a large fee for 30 pages of text explaining why I’m recommending Platform B as opposed to any of the 39 others.

    And bear in mind that the letter of the rules states that, as an IFA, you’re supposed to undertake a fresh comparison every year for all your existing clients on Platform B, C, D and however many others you may have recommended (as well as your regular review of the selection of funds in which they’re invested). That’s just so needlessly OTT that it’s simply crazy. Is it any wonder there’s an advice gap and that the likes of HL and SJP are doing so well?

  34. The definition of independent is based solely on the range of investment products you advise on which is ironic in itself. In addition there are some exceptions, e.g. you can ignore pension transfers, long term care and protection and still call yourself independent.

    In addition, how many of the self-righteous so-called IFAs offer discretionary services, advice on equities and debt instruments and portfolios of ETFs and ETCs? Thought not…

  35. I would like to add my thoughts to the argument regarding restricted adviser. I am one but not by panel, providers etc. I don’t advise on VCT’s, VCT’s Investment Trusts or Split Capital Trusts. (since May 29th 1989 I never have). For 99.9% of people I deal (and I would say this is about the same for the huge majority of IFA’s) with the above because they just would not fit with their objectives. For anything else I would challenge ANY IFA to show anything they do for a typical investor would be superior to what I would do for the same investor. I know quite a lot about the above product areas that I don’t give advice on (or sell) and since 29th May 1989 I have only ever come across 7 people for whom any of the above could be right for them. Simply told them to go to the yellow pages and ring round.
    I have no problem in being restricted (although I detest the phrase) and contrary to Paul Lewis’ comments, on my client proposition I do mention on page 1 in bold text that I am closed as restricted as I do not give advice in the areas mentioned.

    The regulator simply won’t change its stance on this as that will amount to admitting they made a complete and total “bollox” of it and the fact they don’t look at an advisers status shows the importance they attach to it. It will simply disappear into the ether in the same way as their work to show how bonds were so bad compared to UTs. No more was said about that and there will be no more said in the regulators office about the Indy vs Res badge.

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