The arduous task of proving your ‘independence’

If you are an IFA, how can you prove it? As a network providing exclusively independent advice through our membership, this question continues to crop up. So, once again, I am putting together an event to help our members and give them the resources they need to deliver great independent advice to clients.

But what occurred to me when I was putting together the list of speakers is that most events end up berating the regulator for changing things in the first place, then digging out Oxford English Dictionary definitions of suitable, relevant, comprehensive, fair, suitable — and independent, of course.

So I thought I would try a different approach. Having been an IFA since 1998, I kept trying to work out what I needed to do differently to meet all of these ‘new’ expectations.

My starting point in many presentations was that if you were independent ‘back then’, and continued to use the same approach to delivering client advice, I genuinely could not work out what you needed to actually do differently to meet this ‘new definition’.

We are in the business of building great client relationships. When fact-finding and risk-profiling is done well, we get to know a lot about our clients, their needs and objectives, hopes and fears. And we are already engaging interactively, determining advice areas and products relevant to those clients.

Good financial planning and cash flow modelling evidences required rates of return and capacity for loss. Good product and fund research systems enable you to research the whole market, choosing factors that can combine matters of concern to an adviser (financial strength or administration), as well as to the client (charges and flexibility, for example).

Use your in-house or outsourced paraplanner to help you with due diligence, planning ideas and report writing, then make sure your suitability letter is clear and evidences why what you recommend is suitable.

Good financial planning and cash flow modelling evidences required rates of return and capacity for loss

My contention is that if you started with the client, not a pre-determined product list, and if your due diligence started with the widest range of suitable products (and kept your audit trail, of course), then you have delivered independent advice. Simples, as our great friend Oleg would say.

Gill Cardy is network development director of Validpath