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January 4, 2013 5:36 pm
Private investors will no longer be offered “independent” advice by some of the UK’s largest financial advice firms, following the introduction of new rules that some in the industry say will confuse clients.
Wealth managers including Towry, Brewin Dolphin and Investec Wealth and Investment have all opted to ditch their “independent” status and become “restricted” advisers instead.
However, the companies say that clients will not notice any difference in the service they are offered as a result of the name change.
The separation between independent and restricted advice is part of the Financial Services Authority’s (FSA) plan to clean up the advice sector following a number of high profile mis-selling scandals.
From December 31 2012 new minimum qualifications have been put in place to improve professionalism, and advisers must now clarify the fee they charge clients instead of accepting commission from product providers.
Companies are also required to tell clients whether they can offer advice on the full range of financial products available or a limited selection. Firms can only declare themselves independent if they consider products from all providers and all areas of consumer finance. Advisers that do not meet this criteria will be “restricted”.
The FSA said that it was setting a new standard for independent investment advice and expected most firms to retain the independent title. A poll of advisers conducted by the regulator last year found that only 8 per cent of respondents planned to switch to restricted advice when the new rules were in place.
But in the past week the number of firms opting for restricted status has grown.
Coutts, St James Place and Royal Bank of Scotland have all announced that they will be restricted. On its website, RBS called restricted advice a “more focussed [sic] approach”.
“We will be providing restricted advice, as this will provide clarity of choice to clients coupled with carefully selected, best-of-breed products and services,” said Ian Ewart, head of products at Coutts.
Restricted advisers must pass the same qualifications as independent advisers and meet the same “suitability” requirements to ensure they are providing useful advice.
The title restricted will cover a number of different firms, explained Russell Warwick at Prudential. “One adviser might be restricted because he/she specialises in a particular type of financial advice planning, for example a pensions specialist,” he said. “Another type of restricted adviser will be those who consider all types of financial planning advice but can only recommend products from a limited number of providers.”
Hargreaves Lansdown declared that it intends to remain independent, using its in-house research team to look at the full range of products on offer.
“We like being able to survey the whole of the market,” said Danny Cox, head of advice at Hargreaves Lansdown.
Paul Taylor, managing director of financial adviser McCarthy Taylor said that the obstacles to independent status would be too high for some advisers.
“Clearly anything that inhibits clients’ access to truly independent, objective advice is bad for our profession . . . but because costs are so high many are just unable to offer a viable service.”
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