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Prudential: IFAs to delay independent choice until after RDR

Prudential believes many IFAs will defer making a decision about whether to offer independent or restricted advice until well after the RDR deadline has passed.

Distribution change director Russell Warwick believes advisers will look to retain their independence immediately after December 31 and then assess whether holding on to independence is commercially viable.

He says: “We will not know what it is like until we are there. It is likely that the default position for most IFAs on January 1, 2013 will be to stay independent, with decisions about whether they offer an independent or restricted advice proposition not made until later next year or even 2014.”

Warwick argues that the reality of a big industry initiative as the RDR means advisers will focus on other priorities such as getting qualifications.

He says: “That is a sensible approach for advisers. They should not be forced into making rash decisions.”

Evolve Financial Planning director Jason Witcombe says: “Many IFA firms are likely to carry out a strategic review of maintaining their independence a year down the line.”



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Derek Bradley ceo PanaceaIFA 17th May 2012 at 9:42 am

    It is becoming increasingly clear that the question of who will be truly independent and who will be restricted in 2013 is most uncertain at this stage due to the fact that so many advisers themselves are not really sure themselves about the definition.


    Alan Lakey put it very well in his observation that “Regulators and politicians just can’t help themselves. They take a simple concept, which is universally understood, and they complicate it to the point where nobody understands and we lose the will to argue.

    Ten years ago both advisers and consumers understand the clear distinction between an ‘independent adviser’ and one who was restricted in some way. The IFA brand became a known quantity and was pushed by consumer journalists as the Rolls Royce of advice. This clarity was diminished when the FSA decided that depolarisation was the way forward. This enabled non-independent advisers to pretend they were independent by the use of phrases such as “best of breed”. This weakened the ‘independent ‘ brand as consumers could no longer easily distinguish between IFAs and restricted advisers. In fact, the FSA cannot distinguish either as they confirmed in a FOIA response when they admitted they could not differentiate between independent and tied advisers because some firms operated both models!

    The ultimate fiasco is the mandated ending of the ‘independent’ tag for the majority of advisers. The FSA believes that ‘independent’ means offering a comprehensive range of products whereas consumers have always understood it to mean offering products from the whole of the market.

    How this will work in practice is, like many aspects of RDR, unclear. However my understanding is that a firm that works within a defined area, such as pensions only, will not be able to claim independence even if they offer access to all pension providers.

    If correct, then I and probably 90% of post RDR survivors will have to use the term ‘restricted’. Imagine how confused my clients will be when I explain that nothing has changed, I still operate a whole of market service but I cannot call myself independent. In truth, I have only been able to find one truly independent business. One that is free to do what it likes is free from outside interference and also free from any responsibility or accountability. What’s more, it has nothing to fear from the FOS or the FSCS and, incredibly, its fee income has risen exponentially over the years”.

    The subject of “independent or restricted definition” was discussed in some detail with Richard Hobbs and Alan Lakey in a Thought Leadership presentation and I think the discussion caste some light where it is clear there is darkness.

    The presentation explored some of our RDR survey responses as well as illuminating the perceived client attitudes toward RDR and how they can be tackled.

    So if you missed it live, join myself, Richard Hobbs, Director, Regulatory Consulting, Lansons and Alan Lakey, IFA, Partner at Highclere Financial Services as we discussed the subject of restricted v independent advice as well as other key points of our RDR survey and whose responsibility it is to educate your clients. They also comment to the survey’s findings on:

    • the elimination of bias in the market;
    • ensuring the adviser is the true agent of the consumer;
    • clarity over the costs of advice;
    • appropriate qualifications for financial advisers.

    Here is the link

  2. I really do wish all those who want to retain Independent label post RDR the very best of luck. My view is that it will be too onerous tryingto ensure the correct amount research to evidence the right product will be bad but trying to research over 2000 funds for evry client on every occasion and have robust enough processes to show why the ones you chose is going to lead to all sorts of problems. Maybe not when writing the business, but certainly after the first FCA visit post RDR. That is when the trouble will start, and start it will – mark my words. Especially with “Judgement based regulation”. I am not for one second niave enough to think restricted is going to be an easy ride – but I feel it will be a lot less onerous, time consuming and probably easier to justify to the FCA why the business done is suitable. RDR is bad for the cosumer in terms of costs as they will pay more but the adviser label is going to be a very expensive exercise that will cost some practices their permissions because some the great job they will do for the client will be pulled apart by the regulator because FCA will be gunning for IFA’s to show the rest of us just how serious they are about what needs done to do a “proper” independent job. Nuff said

  3. Gillian Cardy 17th May 2012 at 9:54 am

    Why on earth would Prudential think that choosing Independence is being “forced into making a rash decision”?
    If you are an IFA now why not stay being an IFA??
    It’s only complicated if you want to make it so.
    Anyway – whether you agree with me or not, product providers desperate to influence and control their their distribution patterns shouldn’t be your mentors in making this decision

  4. Gillian Cardy 17th May 2012 at 9:58 am

    And shame on all those who allow advisers to continue to labour under the misapprehension that you “have to research over 2000 funds for every client on every occasion”.
    And making sure that the implementation and supervision is fair and proportionate is precisely why you ought to want (and want to join) a trade association exclusively representing and supporting Independent advisers … that’s why IFA Centre exists!!

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