Restricted advisers are the ‘GPs’ of financial advice

The current regulatory market has paved the way for restricted advisers to be regarded as the general practitioners of financial advice, leaving a gap in the market for specialist independent financial advisers to focus on more esoteric investments, a financial planner said.

In an interview with FTAdviser, to be published later today (21 February), Chris Robertson, financial planner and partner at Dundee-based Robertson & Donald, said one reason why the partners decided the firm should be restricted is because they do not look at esoteric investments due to their client base.

Mr Robertson said: “We felt there was no need to go down the IFA road as we don’t need to offer those products.

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“Potentially one of the dangers of an IFA is that, and I realise it’s early days for the FCA, but if you are going to be an IFA I think you will have to actively show you are dealing with all these retail products at the end of the day.

“I’ve seen a few mission statements and I’m not sure you can get away with just [saying] we don’t deal in this or that and discounting them automatically.

“I’m not so sure that will be allowed and if it is the case that you can do that, what’s the point of having a distinction between restricted and an IFA?”

He believes the reason why more advisers are going restricted is due to IFAs’ higher potential risk, and cites Sesame’s recent announcement that it was going restricted as an example.

Mr Robertson said: “I think that there’s a certain kudos within the industry of calling yourself an IFA, very much that, but I think there’s going to be an educational process.

“When the term IFA was coined all those years ago, it was IFAs versus tied agents and there was all that furore about that. I think one of the dangers at the moment is that some people perhaps are suggesting that restricted is tied, which is not the case.

“So I think the argument will continue about the restricted IFA.

“I think what you might find is that niche firms might spring up – you might have your [venture capital trust] firm, your [enterprise investment scheme] firm.

“So the restricted adviser is the GP medical practice and you may need to refer someone to a specialist.”

Last month, the Association of Professional Financial Advisers told FTAdviser the Financial Conduct Authority should ditch requirements for advisers to describe themselves as ‘independent’ and ‘restricted’.

Chris Hannant, Apfa director general, said the regulator’s labels failed to help consumers understand what service they were getting.

Martin Wheatley, FCA chief executive, also recently admitted more work needed to be done on clarifying the definitions but he stressed it would not be seeking a formal change of the rules.

The full interview will be published later today.