Restricted advice: The key to the industry's future?

  • To gain a greater understanding of restricted advice models
  • Learn about new entrants into the space
  • Understand how both restricted and independent models can help plug the 'advice gap'
Restricted advice: The key to the industry's future?

Is restricted advice the way forward for intermediaries? The disappearance of banks from the advice sector following the retail distribution review, plus the cost of numerous mis-selling scandals, has clearly narrowed the avenues of advice available to consumers.

Restricted propositions will never be universally popular but there are signs they could help to plug the advice gap.

Several years on and the space looks to be on the verge of a shake-up: big firms are making their move into the restricted arena. But is this a positive development? 

While some welcome a source of fresh competition for the industry, concerns about the limitations of vertical integration and mis-selling risks show no sign of going away.

Going large

As it stands, many larger advice outfits already operate with restricted models: the likes of St James’s Place and Quilter fall into this bracket. These behemoths are now facing fresh competition from several quarters.

Last October, Lloyds Bank announced it had teamed up with asset manager Schroders in a bid to create an advice powerhouse. Called Schroders Personal Wealth, the newly formed company has already unveiled plans to recruit 700 advisers. Its offering will be rolled out in the second half of 2019, and will target affluent UK consumers.

It’s not just the banks that are seeing merits in the restricted model either: Octopus and Prudential have recently launched their own offerings. The former is applying a £2,000 initial advice fee, and then a tiered-fee structure, with an all-in annual fee of 1.8 per cent (comprising ongoing advice and fund management costs) on assets up to £500,000, which reduces thereafter.

Another company that has been growing is Standard Life’s 1825. On March 1, the restricted outfit announced it had acquired BDO’s Northern Ireland wealth management operation – its seventh acquisition since its inception, albeit the first in almost 12 months.

Although the plan for many is to compete with other large restricted players, the independent space could also face further upheavals as a result – via acquisition, for example. Some commentators believe that, with the regulatory burden only growing, more firms could consider going down the restricted route.

Andy Thompson, chief executive of Quilter’s advice business, says: “The impact [of the increased regulatory burden] is likely to be more acute for independent models, as analysing and monitoring the huge variety and range of products, funds, wrappers and platforms is a time-consuming and costly process. 

“Restricted advisers can benefit from experts who research and vet products so that they can focus on financial planning areas, which add significant value to their clients and serve a wider clientele.”

Stephen Kavanagh, chief executive of independent advice firm Chase de Vere, notes there are commercial drivers behind the proliferation of restricted offerings. 

“Many adviser firms choose to be restricted because it means they can sell their own products and investment funds,” he says. 

“This is understandable from their perspective because it means they earn bigger margins, as they charge for the advice and benefit from charges on the products that are sold.”


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. How many firms has Standard Life's 1825 acquired since its inception?

  2. According to FAMR, what percentage of advice firms operate as independent?

  3. Mr Thompson says both types of advice can be delivered with the character and respectability of what?

  4. What does Mr Smith say about the aim of Quilter's FAS?

  5. How many advisers graduated from SJPs academy last year?

  6. What does Mr Ariyawansa say about banks offering advice?

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You should now know…

  • To gain a greater understanding of restricted advice models
  • Learn about new entrants into the space
  • Understand how both restricted and independent models can help plug the 'advice gap'

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