Independent DOES mean whole-of-market, FSA says

The future definition of ‘independent’ financial advice will remain linked to the range of products offered to clients, the FSA has said in an apparent contradiction of its own retail distribution review.

The proposal was delivered in an FSA policy statement on conduct of business (COB) rules.

Yet the discussion paper produced by its retail distribution review only weeks ago expressly linked independence to fee-based remuneration not whole-of-market advice.

‘Advisers will need to continue to look across the whole of market and offer customers the option of paying by fee in order to call themselves independent,’ the FSA's COB policy paper said.

‘To describe its service adequately we believe a firm should explain to clients the breadth of firms and products which it intends to consider in making its recommendations.’

The FSA said that industry figures who responded to its consultation period had ‘broadly agreed’ with keeping the current definition of independence to ensure customer clarity.

A spokesman for the authority said that the definition was required to provide continuity following changes to conduct of business rules.

A product-based definition of independence stands in stark definition to RDR proposals that linked ‘independence’ to an entirely fee-based professionally chartered model.

While this was welcomed by financial planners, others feared that it would leave large sections of the market unable to afford fee-based advice with no option but bancassurers.

The policy document also recommended that advisers continue to use the menu/initial disclosure document, although from November they will also have the freedom to draw up their own if they feel that it better reflects their business.