Many advisers that have opted against retaining independence post-Retail Distribution Review may be doing themselves a disservice by over-complying with the rules and openly describing themselves to clients as ‘restricted’, according to Prudential’s Paul Harrison.
Speaking to FTAdviser, Mr Harrison, head of the firm’s business consultancy unit that is providing post-RDR advice to intermediaries, said that the term ‘restricted’ could mean anything that is not independent and therefore does not offer clarity to clients and could carry unnecessarily negative connotations.
Mr Harrison said a restricted adviser could in reality offer anything from a single-tied to a broadly ‘whole of market’ product offering that discounts only certain esoteric retail products. He added that often most of an adviser’s business may centre around a core product proposition, which could be deemed ‘semi-restricted’.
His comments came in response to a comment from Paolo Standerwick, director of Sutton-based MLP, who stated in an interview with FTAdviser on Friday that he may become restricted if the independent bar is not lowered.
Mr Harrison disputed Mr Standerwick’s assertion that the independence bar is being set too high by the regulator, saying the problem was actually with the term ‘restricted’ and that advisers therefore needed to adopt a different tact that avoids the label.
This, he said, could be a key factor in growth of the ‘restricted’ market over the coming 18 months. Depending on which survey one believes, only around 10-15 per cent of IFAs have given up their independence post-RDR.
Mr Harrison said: “I think the restricted marketplace is something that has potential to grow. The biggest issue about restricted is the actual word ‘restricted’ as it seems narrow.
“The pinnacle of financial advice has always been independent and that giving independent advice means that you look at the whole of market place whereas most restricted financial advisers might only use six or seven providers at one time.
“When they [restricted advisers] introduce themselves they should say that they are a financial adviser and have decided not to be independent as the market is very broad so [they] specialise in certain areas. That is not technically incorrect.”
Mr Harrison said he believes the next 18 months will be the biggest transition period for financial advisers as they re-look at their proposition and make changes in light of the new regulatory regime.
He said: “We are in this period of transition. It was supposed to be last year but this year will be the transition phase as advisers look at their model, proposition, fee structures.”
Some independent advisers have expressed similar concern at restricted advisers disclosing their label but not the nature of their restriction, although for quite different reasons to Mr Harrison.
Paul Stocks, financial services director at IFA partnership Dobson and Hodge, told FTAdviser in an interview last month that the Financial Services Authority has not detailed exactly what restricted firms must disclose, saying this could lead to clients being mis-led.
He said: “You are quite within your rights to specify what your restriction is but... under no obligation.
“They have to disclose they are restricted but don’t have to disclose the nature of that restriction unless they choose to.
“The key thing the regulators need to do is make sure that whatever [firm] is giving advice the nature of that advice is clearly articulated.”
