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.