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Home > Training > Adviser Guides

Adviser Guides

Guide to Independent versus Restricted

Published by FTAdviser | Jun 13, 2012

Choosing to be independent or restricted has a far greater impact than just the way you describe the type of advice you offer.

Restricted status could force you to end your professional referral arrangements while opting to remain independent could impact your professional indemnity insurance premiums.

Can an adviser identify a common relevant market across all of its clients that does not include certain retail investment products yet still call themselves an IFA?

This guide tackles what is independent and restricted status, the pros and cons of both classes and how to make sure your clients understand the type of advice you offer post Retail Distribution Review.

Answers supplied by the FSA, Chris Hannant, policy director of the Association of IFAs, Keith Richards, distribution and development director of Tenet Group, George Higginson, chief executive of Sesame Bankhall Group, and Andrew Power, lead Retail Distribution Review partner at Deloitte.

  1. Q: What does independent mean?

    Independent means having the capability and awareness to advise on whole of market retail investments.

  2. Q: What do I have to do to be independent post 2012?

    Independent advisers must be able to undertake a comprehensive and fair analysis of the relevant market that is both unbiased and unrestricted.

  3. Q: What are the pros of being independent post 2012?

    The kudos of being able to maintain the independent label is likely to continue.

  4. Q: What are the cons of being independent post 2012?

    There will be additional pressure on firms to ensure they establish and maintain adequate knowledge of the wide breadth of retail investment products.

  5. Q: What impact will independence have on PI insurance?

    On a direct comparison with restricted advice, the increased scope of independent advice will increase the potential for unsuitable advice or...

  6. Q: What does restricted mean?

    Restricted covers all firms – except those offering basic advice - that do not meet the requirements for being independent.

  7. 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...

  8. Q: What are the pros of being restricted post 2012?

    Opting for a restricted advice gives the firm more control over the products, providers or client segments that influence the firm’s overall advice...

  9. Q: What are the cons of being restricted post 2012?

    If a firm is moving from being independent based on today’s rules to restricted advice they will need to consider the likely reaction of their...

  10. Q: What impact will being restricted have on PI insurance?

    For legacy business there will be very little impact, according to George Higginson, chief executive of Sesame Bankhall Group.

  11. Q: What impact does my status have on how I charge clients?

    Both independent and restricted advisers will be subject to the Adviser Charging rules from 31 December 2012.

  12. Q: What are the qualification requirements for advisers?

    The same qualification (and indeed advice standards) apply to all advisers equally whether they are independent or restricted.

  13. Q: How should I explain my status to my clients?

    Advisory status should be explained in writing, verbally and in marketing material, according to Chris Hannant, policy director of the Association...

  14. Q: Can I be both independent and restricted?

    There is nothing explicitly in the RDR regulations that would prevent a firm having both an independent and restricted offering.

Finished reading this article? Bank 1hr Structured CPD below.

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Q1.  What examples are given for markets in which an ‘independent’ adviser can specialise?

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Q2.  How must a ‘relevant market’ be defined to ensure an independent adviser can exclude certain products?

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Q3.  Why might fees rise post-RDR according to Tenet’s Keith Richards?

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Q4.  Why did Deloitte’s Andrew Power say PI premiums might NOT rise for independent advisers?

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Q5.  What is the key difference for restricted advice compared to independence?

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Q6.  Can a firm describe itself as independent if it has a restricted advice offering?

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