What does “restricted” advice really mean nowadays? Some see this as a question of semantics, others one of outcomes.
Either way, the debate was reignited again a few weeks ago by consumer group Which? and its probe into St James’s Place. In a mystery shopping exercise, it found three of the 12 advisers visited did not say they were “restricted”. Which? also said the others pitched the status as a “technicality” and not a key variance between them and IFAs.
Whether restricted advice, or SJP’s particular brand of it, is inherently inferior to independent is a debate for another day. What is worth continuing to explore now is whether our descriptions have stayed up to date as the advice market has evolved around them.
A nuanced name
While “tied” may have been dropped from the advice lexicon, that doesn’t mean there aren’t still a bewildering array of ways to describe advice.
An adviser Money Marketing looked up on directory Unbiased recently threw up a new one of these: “restricted plus”. The Intrinsic adviser explained: “This means that we provide advice from a carefully selected panel of providers, platforms and investment funds. If we cannot find a suitable product or provider from that panel we are able to research the whole of the market to find a solution.”
Several years ago, FCA technical specialist Rory Percival suggested that “whole of market restricted” might not be a clear enough way of describing services.
A client may well jump to the conclusion that “whole of market” means whole of every market, that is true. But “independent” doesn’t mean, as most clients would probably guess, that the adviser has to investigate every single possible product on the market.
I think if you believe (and I mean really believe) in the solutions then it isn’t an issue.
— Adam Carolan (@Adam_Xentum) August 16, 2017
The FCA, for example, has already said that “independent firms” won’t have to consider peer-to-peer investments in order to retain their independent status.
A moving target
Other new products coming onto the market and new regulation aren’t making things any easier for advisers to be decisive as to what camp they fall into either.
Mifid II will change the independence standard from a “comprehensive analysis” of the market to a “sufficient range” of different product providers.
Could be fewer under MiFID II as some firms that are restricted now could be independent from January
— Rory Percival (@rorypercival) August 16, 2017
If some advisers don’t go to the ends of the earth to describe these nuances to clients, one can hardly blame them.
The FCA has pointed out the issue of charges disclosure, but Money Marketing’s own research with adviser consultancy The Yardstick Agency earlier this year showed a similarly low level of status disclosure: only 38 per cent of restricted advisers show their status on their website, compared to 83 per cent of their independent counterparts.
— David McCabe (@David_FivePoint) August 16, 2017
There are no obvious signs that it is hurting or helping either.
Which begs the question: Is the debate we are still having one that is relevant to clients? Evangelists for either side will probably say it is, but more focus on the underlying advice given and the suitability and charges of it might be a better way forward.
Justin Cash is news editor at Money Marketing