Give them a break
The FSA has issued final guidance paper and, with the deadline for conditions imposed by RDR only six months away, advisers need to decide on their future business model and make preparations
As the legendary television presenter Hughie Green used to say on Opportunity Knocks back in the 1970s: “It’s make your mind up time, folks.”
Hughie was, of course, referring to viewers voting on the precursor to today’s Britain’s Got Talent and not financial advisers but the phrase is perfectly suited to IFAs at this moment in their history.
It is IFAs who now have to make up their minds about their own futures as the FSA has lanced any post-Jubilee bubble with a ‘back to work’ final guidance paper on the retail distribution review issued last week.
There is not much fun about FSA Finalised Guidance Paper FG12/15 Independent and Restricted Advice.
At just 16 pages it is little more than a pamphlet for the paper-making factory that is the FSA but it is vitally important for all advisers.
It is worth noting at this point that opinions and surveys vary on exactly how prepared most IFAs are for RDR. Some surveys suggest IFAs are woefully behind the curve with just a few per cent truly ready. Others say that 75 per cent or more are ready with their RDR preparations, gap-fill study and the like.
My guess is that the true figure is somewhere between these two extremes. Few IFAs who plan to stay in business will have made no or little preparation and many, if not most, will have already applied for their statement of professional standing, the professional body stamped ‘passport’ that will allow them to move from one regime to another, embracing a new standard for independent financial advice.
One question some have asked is: what is the difference between the old version of IFA advice and the new version? This is a tough nut to crack but the key difference to me is the long-overdue attempt to eradicate commission bias in the new world of advice which dawns on 1 January 2013.
In its final guidance, the FSA also talks about RDR improving the “clarity with which firms describe their investment advice to consumers” and says independent advice from 1 January 2013 must be a “new standard” and advice should be “genuinely free from bias towards particular solutions or any restrictions that would limit the range of solutions that firms can recommend clients”. Adviser charging is the means by which this new version of independent advice will be delivered.
So far, so good, but there are many potential pitfalls for the unwary IFA.
Just one of these is in the area of ethical or green advice. Firms which specialise in this area but do not conduct ‘fair analysis’ of the entire range of products, ethical or not, may fall foul of the rules governing who can and who cannot claim to offer truly independent advice, particularly if an ethical advice firm holds itself out to be independent in the broader sense.