The Personal Finance Society says advisers could face “dangerous” liability risks where they have outsourced to a third party.
Speaking at a Defaqto RDR conference in London last week, PFS chief executive Fay Goddard said liability for investment advice rests with the individual who gave the recommendation.
She said: “If advisers are asking a discretionary investment service to match an attitude to risk that they have defined and that they are taking responsibility for, the personal recommendation may be to use the service but the adviser could still be liable for the advice.”
Goddard said clients, advisers and third parties need to be clear on the service being provided and who is taking responsibility for what service.
Last week, the FSA published its final guidance on replacement business and centralised investment propositions. If there is no contract between a client and a DFM, advisers should make this clear.
Atkinson Bolton Consulting director Simon Gibson says: “It is up to the adviser to ensure the DFM has an understanding of what the adviser’s client is trying to achieve, not just in terms of risk but also things like timescale. The adviser has to decide where the buck stops.”