The RDR consultation paper, released today, confirms all the leaks Money Marketing revealed earlier this week such as the split between independent, restricted advice and non-advised sales .
Restricted advice will include single-tied and multi-tied advisers who will have to gain the new higher qualifications.
The paper clarifies that firms which manufacture their own products, such as wealth managers and distributor influenced funds, will still have to advise on other products in the market in order to call themselves independent.
The new definition widens the range of products, beyond packaged products, to which the independence standard applies.
In extending the scope of products covered under the handbook definition of “retail investment products”, the FSA hopes to ensure that customers receive truly independent advice on all the types of products that they might reasonably expect to.
It warns advisers that it has evidence exchange traded funds are not being sold in significant numbers, but it says the products should be considered as part of the investment advice process as they offer a cheap and transparent way to invest in particular markets.
The new handbook definition of retail investment products now includes unregulated collective investment schemes, investment trusts, structured investment products, and other packaged investments which offer exposure to underlying financial assets.
The paper also clarifies how the term independence will work for firms specialising in particular areas of advice.
It says that firms which provide independent advice from a restricted
area must be clear that this advice is restricted.
However, they may say they are acting independently in respect of those services for which they provide independent advice.
For example, a firm that provides independent advice on mortgages and
restricted advice on retail investment products will not be able to hold
itself out as an independent financial adviser.
But it would be able to hold itself out as an adviser providing independent
advice for mortgages so long as it was made clear that it provided restricted
advice for retail investment products.
Similarly, if a firm has a narrow market such as advising on ethical
investments, it will not be able to hold itself out as acting independently
in a broader sense.
The paper says: “For example, a firm “Greenfield’, which specialises in ethical
and socially responsible investments could not hold itself out as “Greenfield Independent Financial Advisers”.
But it says that “Greenfield – providing independent advice on ethical products” may be acceptable.