FCA has taken a sensible approach to independence

Gill Cardy

So the FCA has determined that some firms, while describing themselves as independent, were not offering a truly independent service. Well that will not come as a surprise to those independent advisers who have been watching what the competition is up to.

The FCA has taken a sensible approach, looking at what 50 firms are up to and has identified areas of good and poor practice, but it has clearly set out that this initial review of RDR implementation draws a line in the sand and that further work to be undertaken later in the year will be increasingly “assertive”.

Of course attention has focused on the firm placing 98 per cent of its business on one platform, with accompanying comments that the FCA was still speaking with forked tongue on this issue.

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The earliest guidance on implementing independence and papers on the use of platforms made it clear that the use of one platform in an independent firm would probably be rare, but the FCA never said it was impossible. Much depends on the client segmentation process and appropriate due diligence which determines that the recommended platform does in fact offer the best combination of tax-efficient products, investment options, administration benefits and cost.

At the same time the regulator made it perfectly clear that a firm could not say “unequivocally upfront” what products or providers would be suitable for a client and expect to maintain its independent status. This all seemed perfectly reasonable.

How can you know before a client walks through the door what products or providers are going to be suitable for meeting the infinite variety of each individual client’s needs?

But a closer read of the guidance makes clear that the problem in the quoted case is not the use of one platform.

It is the fact that the firm told their new client very early on in the first meeting that the advice they would get would involve that platform solution. Which sounds suspiciously like saying unequivocally upfront that the answer is bound to involve this platform, before I know anything very much about you, your existing portfolio, your plans, your available resources, your attitude to risk, or my suggested target investment return and my recommended tax and investment solutions.

Use of one platform, researched well, targeted accurately to appropriate market segments is not a barrier to independence. Knowing the answer before you even meet the client is.

Gill Cardy is managing director of IFA Centre