It is “absolute rubbish” that independent advisers need to know all the ins and outs of every investment product, although advisers must get “under the bonnet” to understand the fundamentals of products that they are thinking of recommending, an adviser said.
In an interview with FTAdviser to be published later today (12 July), Neil Chamberlain, director at Truro-based IFA Worldwide Financial Planning, said that advisers should understand things to a “reasonable level”, but he said it would be “untenable for them to know everything”.
He said: “We’ve faced all these issues over the last 12 months or so in regards to [unregulated collective investment schemes] and the regulator saying that advisers need to get to understand the ins and outs of all of these products and therefore they need to know the hibernation consideration of the wild bug that might go in and bury itself in the deep forest in the middle of nowhere.
“Rubbish. Absolute rubbish. The fundamental considerations are basically what are the key things that we do and we manage people’s risks.”
However, Mr Chamberlain admits that an understanding of what goes on below the supposed features and benefits is needed.
He says: “Most of my advisers carry screwdrivers and hammers around. They will take a look at this shiny red Ferrari which looks like one but once they get the bonnet up and start taking it apart they might find out there is a little lawnmower engine in it.”
Mr Chamberlain separately added that he believes about 85 per cent of the advice industry are still focused on selling products and not on actually advising, as that is all they have known and they are struggling to change their approach post-Retail Distribution Review.
He said said his view based on anecdotal evidence is that the vast majority of advisers are still transactional in approach and that the industry is currently going through a period where they are being educated in pure advice.
Mr Chamberlain said: “About 85 per cent of this industry sell things, they don’t advise. Unfortunately I think that’s where also the regulator has to flip its idea of what independent advice is; it’s not selling products to people.
“It will take time to change from being transactional to advising but there is still a large element or percentage of advisers in the industry and that is all they’ve know. I think now is a period of time to educate advisers not to sell but to advise.”
Click here to read the full interview.
