Martin Bamford (pictured), Nigel Barker-Smith and Campbell Edgar give their tips on meeting the regulator's criteria for independence.
Managing director, Informed Choice
There was a lot of scaremongering before Christmas about how tough it would be to demonstrate and evidence independence.
We use research systems such as Synaptic Comparator, which help us evidence it, and a lot of this information goes on file. But this tends to be more for the Financial Services Authority (FSA) than the client.
Our clients, in terms of what they see in the report, take it as read that we’re looking at everything that’s in their best interests. We treat every client as an individual because you have to see what works for each client [separately]. While we have access to model portfolios, we don’t assume they are always the right solution.
Maintaining records on paper
We use online systems, but everything we do gets printed out and goes in an official paper archive as evidence.
We do believe in independence and what we do, but restricted firms can be useful for smaller clients. The independent versus restricted issue was probably brought in by the FSA because of the rise in distributor-influenced funds.
Director, NBS Financial Planning
I don’t worry about evidencing to clients, but we record client meetings in detail that evidence our process and independence.
Plain meeting notes
We go to town on client meetings: using Truth, the cashflow software system, we produce a six-page document that clients get at a monthly ‘tracking progress’ meeting.
The first page is full of plain written notes about what we’ve talked about. It’s the most important piece of paper for me. There is no question about lying or liability because I’ve written down what we’ve agreed to in the client’s language. The benefit of this is that I’ve covered my liability for the FSA in regard to displaying options and showing evidence.
The clients say they appreciate this method. The rest of the document will show asset particulars.
We do a yearly platform review exercise using Novia. We haven’t changed it for five years, and we just make sure it is still relevant.
We use Vanguard and Seven Investment Management as our fund managers because we take the passive low-cost approach.
We have everything reviewed by a compliance officer once a year to keep us in line.
Head of private clients, John Lamb
We have a product search tool, such as Capita’s Synaptic Comparator, which can help evidence the range of products we look at.
The spread of a firm’s business also speaks for itself. If everything goes to a certain fund with a certain manager, it’s very easy to see that you’re not independent!
There’s no commission bias anymore, but if you only understand one product and that’s what you sell to your clients, it is not independence.
Robust investment process
You need to demonstrate you have a robust investment selection and portfolio construction process. We happen to outsource that, but other firms do that in-house.
We say to the third party: ‘This is our mandate. Can you give us the best-of-breed funds?’ Then they come back to us with the quantitative analysis for using their funds in portfolios.
We have a solid research approach and a centralised investment proposition (CIP). The FSA is ambivalent on CIPs, but for IFAs, it’s the most straightforward way of running things, particularly when you’re dealing with a range of platforms.