Will the advice market mainly consist of those labelling their services restricted or independent in the future?
According to Keith Richards, chief executive of the Personal Finance Society (PFS), the advice industry seems to be heading towards a primarily restricted model.
He explains: “It is currently creeping towards restricted, driven by a number of factors, including consolidation and vertical integration model evolution.”
But how many advisers in the UK are restricted and how many are operating a fully whole-of-market, independent proposition?
Mr Richards says: “The exact split between independent and restricted advisers is currently not captured but assumed to be 50/50 and moving increasingly towards a restricted population.”
He is right to say the data is not captured - the Financial Conduct Authority, in response to FTAdviser, said it does not collect data on the restricted or independent status of advisers.
Nor does the Association of Professional Financial Advisers break down its membership by restricted or independent.
Chris Hannant, director general of the advisory trade body, comments: “We don’t collect that data but I would expect it to reflect the adviser population in general. There has been an increase in the number of restricted firms.”
Networks and support services organisations have mostly determined their propositions. For example, Sandringham Financial Partners is 100 per cent restricted.
Openwork operates a restricted distribution network and St James’s Place also has a restricted offering.
The majority of firms which have service contracts with support services provider Bankhall are independent advisory firms.
Fellow support services provider SimplyBiz does not make it mandatory for members to state what proposition they offer.
However, based on the figures of usage of members who use SimplyBiz’s restricted compliance document hub and its independent compliance hub, it appears to cater to approximately 6 per cent restricted advisers and 94 per cent independent.
Gill Davidson, group regulatory director for Tenet, says: “The majority of our membership is independent or operating a hybrid of independent and restricted advice, depending on its customer segmentation model.”
Do clients understand the difference between the various designations?
Not according to Mr Richards. He says: “The current labels offer little consumer value and it has become questionable as to whether the advice labels should remain, as they continue to confuse the public and create unhealthy division among the profession.”
In fact, Mr Hannant believes the use of labels only makes it more difficult for consumers to understand what sort of advice they’re getting.
He says: “I’m not sure labels help. The important thing is whether the client understands the actual service they are getting, and on what terms, which boils down to a more nuanced description than ‘restricted’. This involves more than just a label.”