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RDR redefines independent’ adviser label

The latest RDR consultation paper has split the sector into independent advice, restricted advice and non-advised sales and introduced a new definition of independence.

The proposals, first revealed by Money Marketing, will see restricted advice include single and multi-tied advisers who will have to pass the QCF level-four qualification.

Firms offering their own funds, such as wealth managers and advisers who provide distributor-influenced funds, cannot restrict their advice to these products as they will need to research other products on the market to retain the independent banner.

A new handbook definition of retail investment products widens the scope of products covered by the independent standard beyond packaged products to include unregulated collective investments, investment trusts, structured products and other investments with exposure to underlying financial assets.

The FSA also encourages advisers to consider the use of exchange traded funds, pointing out they have not been sold in significant numbers despite offering a “cheap and transparent way to invest in a particular market”.

The paper also clarifies how independence will work for specialist adviser firms. Those offering independent advice on a restricted area of the market must make it clear they are only acting independently with respect to that one area.

A firm offering independent advice on mortgages and restricted advice on investment products will have to disclose this clearly. A business specialising in ethical investment advice could not call itself “Greenfield IFA”. But the paper says “Greenfield – providing independent advice on ethical products” may be acceptable.

Ark Financial Planning director Phil Perry says: “There is a danger of overcomplicating matters with too many labels.”

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