‘FCA needs to educate the public on restricted’

Don Wernham may have reached the end of the road with independence.

Launched in 2009, he says his IFA firm Simple Solutions Financial Management may go restricted, as he is no longer confident it is offering a properly ‘independent’ proposition under Retail Distribution Review rules.

Anyone who has been keeping track of the debate will know Mr Wernham is not alone: confusion has reigned over the new definitions since they came into force, to such an extent that the Financial Conduct Authority’s Nick Poyntz-Wright was forced to admit a lack of clarity in January and said the regulator will be ‘redoubling efforts’ to clear up the rules.

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Interestingly, earlier this week the FCA published some new guidance on independence, which looked very much like the old guidance on the back of an 113-firm review which found most IFAs are using the term correctly.

Clive Gordon, head of investment advisers and platforms at the FCA, told FTAdviser: “As part of our general discussion with the industry, we have had feedback asking us to clarify the rules in this area.

“The rules aren’t as onerous as some firms think. [There has been] a lot of discussion of whether smaller firms can comply with our independence rules. We feel they can.”

‘There’s no way I’m going to do that’

Mr Wernham says that he and business partner partner have been “sitting on the sidelines” watching the independent/restricted debates carry on.

Despite seeming to adhere to an independent proposition by advising on a wide range of pension and investment products including looking at venture capital trusts and enterprise investment schemes, as well as using two platforms for investments (Nucleus and True Potential), Mr Wernham believes he is offering a restricted proposition.

“If you look at the regulator’s stance on this and the definition, in this moment in time we definitely should be restricted.

“Everybody seems to have a slightly different slant on what the regulator is saying. The FCA may soon advise us of what they want and then we can make the decision. But my understanding is that if you don’t, for example, advise on deposit accounts and NS&I then you cannot call yourself an IFA.”

A few months ago Mr Wernham was at a pension switching event held by the Financial Conduct Authority and he told the regulator of his uncertainty over independence.

“He went over a few things with me and it did make a lot more sense. They were very helpful. They gave us their mobile numbers and said if we had any problems to give them a ring, and I followed it up.

“He gave me a scenario and said ‘if there was somebody waiting in your reception area at this moment in time that’s coming in to see you and you know a little bit of information about him’, you have to ask yourself ‘am I approaching this client with a completely open mind or am I already thinking [of what products I’ll be able to recommend]’.