Networks divided over RDR investment exclusion for IFAs
Interpretations differ as to which products an IFA may have to consider to remain independent.
Networks have offered conflicting interpretations of post-Retail Distribution Review independence rules, with some suggesting that the rules extend beyond the exclusion of esoteric assets while others have argued that IFAs should adopt a “never say never” approach.
The news follows on from the results of a series of surveys conducted by Tenet that found more independent advisers said they would remain independent if they were able to fast-track the exclusion of certain products and not have to devote resources to intensive research.
The firm conducted a survey among 423 advisers across 17 regional and online events and found that the percentage choosing either independent or hybrid models rose from 77 per cent to 90 per cent after advisers were given a “detailed analysis” of the new requirements post-RDR.
This analysis included a guide on “how to implement a process to enable advisers to exclude certain products and, more specifically, higher-risk products which are generally not included in current research”.
Keith Richards, group distribution and development manager, said: “With regard to products, post-RDR in order to classify yourself as independent you will be obliged to carry out whole of market research.
“The key point to understand is that the IFA must be willing and able to consider specialist investments as and when it is appropriate to do so. The FSA does not expect a firm to review the market for a product which does not meet the client’s needs and objectives.”
However, Michael Couzons, risk director at Sesame Bankhall Group, agreed that although products such as Ucis may be “seldom suitable” for the vast majority of clients, in the instances where they are a viable option “independent advisers will need to be capable and willing to advise clients on the pros and cons - and suitability - of investing in those products”.
He said: “Furthermore, we need to remember that Ucis are at the esoteric end of the investment scale and there will be more mainstream products that will be covered under the new wider definition of independence, such as investment trusts.
“There are products that might be suitable on a more regular basis that independent advisers will now need to consider.”
Neil Stevens, joint managing director at Simplybiz, agreed that a “never say never” approach is needed and urged IFAs to keep up with their CPD “to make informative decisions of appropriateness and that they have the product knowledge”.
He said: “IFAs need to routinely examine their clients needs and they need a good classification process to enhance the consumer process.
“IFAs need to look at the consumer needs, but it’s crucial to never say never. The processes have to be flexible enough to identify unusual situations if it crops up. You can’t just have a process that does not enable them to cater for individual needs.”