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What does ‘restricted’ advice really mean nowadays?


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.

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.

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.

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 


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Maybe “restricted” advisers should have to wear corsets, drive very tiny cars and use a wardrobe as an office.

    Seriously though. It’s not only the “restricted” tag that confuses many advisers but what “independent” means. I know that when all of this first came about a lot of advisers went restricted because they didn’t understand the term independent and imagined it was more onerous than it was. I view being independent as having the ability to go anywhere without outside influence to find the best solutions for each given client in front of me. It doesn’t mean that I have to research every product on the market every time I speak to a client. In my view I should be aware of what’s out there, keep my knowledge up to date and investigate further if it is a potential solution. It also means I can rule it out and, by understanding my clients, know when something can be dismissed before we do too much work in pointless areas.

    Don’t try to be too clever and above all be fair to your clients. What’s so hard about it?

  2. As I explained to the FSA in my pre-RDR submission, calling a whole of market adviser ‘restricted’, simply because he/she chooses to avoid certain products, is nonsensical. Having avoided split caps, Arch Cru, Harlequin, Keydata and others is, I believe, a vindication.

    For 25 years advisers built the concept of ‘IFA’ in the mind of the consumer and that descriptive referred to the ability to use any company as opposed to being single or multi-tied.

    Is it the case that a ‘restricted’ adviser offers poorer outcomes to consumers? I suggest not.

    • Hello Alan, hope you’re well.
      As you know, I don’t think you actually needed to become restricted in your case. You simply needed to say you had an open mind to all the dross, but having looked at it, you rejected it as being suitable for certain market segments (clients), but would periodically reconsider. It’s the saem with WRAPs and that was confirmed by Rory Percival while at the FSA and then FCA pre and post RDR, i.e. research WRAPs say 6 monthly, define suitable client segments and matching WRAPs and then be aware which to use for which clients, review for new clients 6 monthly, but to move an existing client from WRAP to WRAP is likely to be less appropriate, much like churning of providers.
      Restricted advisers aren’t worse than IFAs, just as tied advisers weren’t (Always) worse for clients. With restricted it depends on the nature of the restriction.
      Independence is simply a starting point of an open mind and bearing aware of ones own biases/preferences and those of ones clients and an open mind does not have to cost more, nor require (significantly) more research.

  3. Robert Milligan 16th August 2017 at 5:19 pm

    Independent, free from control in action, judgement, autonomous, (Collins English Dictionary)If your Advice model requires Financial support from a Regulated Third Party, either by ownership or association, your a “Tied Agent”, If you receive enhanced remuneration, marketing allowance, Training Support, and a convention, you are a “Tied Agent, if your White Labelled Products, ie those not provided by your Principal, you are a Tied Agent, If your Income is controlled and paid to you via a central proposition, you are a Tied Agent, call your self anything else you are lying.

  4. With the eye watering margins in asset management restricted means “the fund partner is getting rich at the expense of the client”

  5. To answer the question of the title: Such a wide and variable range of things that it’s impossible to generalise.

    Not even SJP, for example, is clearly restricted. They have an arrangement for outsourcing investments to a third party DFM (so it’s not appropriate to call them tied, even as far as investments and pensions are concerned) whilst they’re WoM for annuities, protection products, structured products and maybe other stuff as well.

    The muddiness with SJP’s proposition is that they’re authorised to advise only on SJP investment products (how rigidly they observe this restriction is open to debate), but they can (in theory) outsource top ups to non-SJP products to a third party IFA.

    Some adviser firms are restricted by product exclusions whilst others (like me) operate on a Restricted Plus basis, which, incidentally, is (IMHO) just about the only workable restricted proposition.

    But others will (and are fully entitled to) disagree.

    Defining independence is, I suggest, largely a matter of interpreting what the regulator wants and that too seems to be widely variable.

    So it’s all a bit of a buggers’ muddle really.

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