Since independent and restricted were first announced as the new advice labels for the post-RDR world, they have been the subject of endless speculation, debate, confusion and disagreement.
Post-RDR, you may expect the debate to have subsided but it has merely shifted to focus on the type of investment service that will win the perceived battle in the advisory sector. Independence is continually pitched as “versus” restricted, as if in a modern-day gladiatorial battle.
Are we at war? If so, no one has told us here at Tenet where independent and restricted advisers co-exist peacefully. As far as we can tell, advisers are generally fed up with all the infighting and divisive comment around their choice of investment service, which seems to have overtaken the choice between being an appointed representative or directly authorised in terms of an issue to stir up dissent.
In truth, independent, restricted, DA and AR are all choices that advisers must make. We should be concerned with supporting advisers with the facts and services to make an educated choice rather than trying to argue that one is better than another. Unfortunately, that is a little boring for many in the industry who, often with their own commercial agendas, seek to perpetuate certain myths.
Because we support all advisers, we have no such drum to bang and can concentrate on education, development and support.
There are undeniably pros and cons to being independent or restricted, which need to be reviewed in an unemotional manner to enable advisers to make sound business decisions. Certain clients do value and specifically seek out independent advice, others may require it due to their investment needs and objectives. Consumer groups generally promote independence as the best route for advice.
But the obligation to provide whole of market research for retail investment products can be time-consu-ming without enhanced research and support capab-ilities. For a one-man DA firm, independence could be very difficult to retain.
Time invested should also be reflected in the adviser charge so IFAs need to ensure they can explain the value of their expertise and proposition.
Some advisers lack the desire or capabilities to advise on a broader range of products.For them, the restricted route offers a more comfortable option. Some variants of a restricted model may also offer process efficiencies, or even commercial advantages, and we have seen many recent examples of distribution groups finding a restricted proposition commercially attractive. Advisers need to consider whether that is suitable for their clients.
Firms can, of course, offer a hybrid model of both independent and restricted advice – as long as they can demonstrate competence in respect of independent financial advice and maintain separate initial disclosure documentation to reflect each service proposition offered to clients. This is becoming increasingly common and is proof that the different advice labels can be complementary.
Recent research for the FCA suggests there is almost no understanding among consumers about what is meant by independent and restricted advice. It could be argued that if there is a battle to fight, this is where we should concentrate our efforts.
Martin Greenwood is chief executive of Tenet Group