View more on these topics

RDR leaves no space for “dogmatic” investment thinking- Blue Sky

A major point of the Retail Distribution Review is that independent financial advisers will need to demonstrate that they consider the whole of market, without bias or restriction when advising clients.

While this might seem at first like it should be standard IFA practice, this statement in fact holds immense significance because it means IFAs will need to demonstrate objective knowledge, understanding, consideration and potential use of the full investment universe – without restriction.

There will be no place for dogmatic or misguided views that some independent advisers might currently hold on certain investments: an independent adviser will truly need to be genuinely informed, objective, pragmatic and client-centric in their processes and actions. The full universe of investments very much includes structured investments.

While an ever increasing number of IFAs demonstrate a pragmatic and client-centric approach to utilising the benefits of structured products, this latest development in the RDR should see that number develop further still. As a result, we fully expect investors to benefit from a more comprehensive and objective level of independent advice than has been seen before. We certainly applaud that.

Interestingly, some of the most outspoken advisory firms to have called for the introduction of much more demanding criteria under which advisers can call themselves independent have also been critics or reluctant users of structured products.

These firms will now have to take note that the changes they wanted to see have now occurred and under RDR they will need to get past any myths or misunderstandings that might have shaped or constrained their views of the structured investment industry.

Independent advisers will be tasked with identifying those ‘best of breed’ providers with propositions that objectively demonstrate investment integrity and which add irrefutable value to portfolios, for clients. But, they can and should continue to shun and shame those structured product providers with sub-standard investment propositions – often characterised by headline rates and accompanied by sales and marketing twaddle – in the same way that they avoid third and fourth quartile traditional mutual funds (for the same reasons).

With regard to the fundamental shift away from provider driven commission to client fees it is lastly notable that structured investments can be incorporated into the RDR regime seamlessly. The pricing model of structured investments readily accommodates a fee-based approach to independent advice, because any structure can be easily manufactured with commission removed, thereby increasing participation rates or coupons.

We look forward to working closely with the professional advisers who embrace RDR, with aligned views on the need for client-centric integrity and value.


Recommended

8

FSA fines could treble in size

The FSA has today published plans to increase fines by up to 300 per cent through the creation of a more “consistent and transparent framework” for calculating financial penalties.

The curious market reaction to Brexit

Written by Mike Riddell29 June 2016 Headlines over the past few days have screamed about record falls in sterling, record low bond yields and massive falls in equity prices. However, if you take a slightly longer view of markets rather than simply the one- or two-day reaction, I think it’s amazing how little markets have […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. “Blue Sky thinking”
    More like self promotion again?

Leave a comment