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From Adviser Guide: Independent vs Restricted

Q: What do I have to do to be restricted post 2012?

While a firm needs to describe the nature of its restricted advice service to clients, it is free to choose the words that are appropriate for its service, according to an FSA consultation paper published in February 2012.

By Emma Ann Hughes | Published Jun 13, 2012 | comments

Restricted advice must meet the same suitability, adviser charging and professionalism standards as independent advice. The key difference in the FSA’s requirements is in disclosure.

The qualification requirements for restricted advisers are the same as that for IFAs.

Restricted advisers must have a QCF level four qualification and sign up to a Statement of Professional Standing.

Restricted advisers must ensure their marketing does not contain the word independent.

The regulator stated for example, a firm called Greenfield, which specialises in ethical and socially responsible investment, should not hold itself out as Greenfield Independent Financial Advisers. The City watchdog ruled such a firm could label itself as Greenfield – providing independent advice on ethical products.

So, while the FSA has not prescribed how to explain restricted status it is clear that such advisers must ensure existing and prospective clients are aware of restricted status and what that means, both via written material and verbally.

From a compliance perspective, Andrew Power, lead Retail Distribution Review partner at Deloitte, said unlike independence, no regulatory change is required to comply with the defined term of restricted.

However, from a strategic perspective, he said firms have been re-assessing their current advice propositions and business models to make a decision between an independent versus restricted approach.

If advisers elect to remain restricted, Mr Power said firms are looking at the next layer of detail underneath this decision as to which products and/or product providers their restricted advice proposition should include.

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