Who cares if you’re restricted so long as you’re regulated?

Donia O’Loughlin

Over the last few years the Retail Distribution Review separated the industry, with some wholeheartedly believing it was the best direction for the market to go in while others disagreed, warning that consumers would suffer as the RDR was forcing experienced advisers out of the market.

The conjecture over the RDR now seems to have been replaced with the debate surrounding the independent and restricted labels that advisers now have to adopt.

This week’s adviser rant addressed this issue with the adviser stating that while he believes he gives “unbiased, independent advice without prejudice”, he is struggling to identify which category he falls into.

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This story caused debate within FTAdviser’s readers, with Alan Lakey, partner at Highclere Financial Services, stating: “Whether the previous black and white system was perfect is arguable but at least the consumer understood the difference between independent and tied.

“The impact of depolarisation was to muddy the waters (supposedly in the name of competition and consumer enfranchisement) and the RDR simply added a ton of damp compost to an already cloudy mix.”

The FCA made it clear in its first RDR implementation review that advisers have to tell clients their exact proposition but the problem with this is the word ‘restricted’ does have negative connotations.

Advisers should tell clients what they advise on, what they will not look at and what they specialise in, but why do they have to tells client ‘I am a restricted adviser’? What does that mean to a client? To the man on the street, it sounds like a restricted adviser cannot help as much as an independent adviser.

What I think is much more important and which advisers should make clear to clients is whether they are regulated or unregulated. Clients don’t give a damn whether you are restricted or independent as long as you recommend the right products and give good advice.

What does make a difference to them is whether you are regulated or unregulated, as the latter can have severe ramifications on clients if it turns out the advice was actually not in their best interests.

Advisers are a profession

The RDR has been in place for almost one year now with the aim of making the industry more professional. Well this has obviously failed so far.

Earlier this week, I revealed that local authorities are resisting the introduction into new long-term care legislation of a requirement to refer self-funding individuals to regulated financial advisers and are wary of referring to advisers in general due to past mis-selling scandals.

Kay Ingram, divisional director of individual savings and investments at national firm LEBC Group, told FTAdviser her perception from an Association of British Insurers meeting was that local authorities “seemed wary” of referring those that need long-term care to financial advisers “due to mis-selling scandals of the past”.

A reader commented on the article asking why there was no mention of Society of Later Life Advisers. He wrote that these advisers go through a “comprehensive and demanding assessment process to become a member of this elite group”.