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Peter Williams sparks independent versus restricted debate

by Alex Steger on Nov 09, 2012 at 13:21

Peter Williams sparks independent versus restricted debate

Former Aegon head of industry development Peter Williams has reignited the debate over independent and restricted labels, arguing the Financial Services Authority’s (FSA) definition of independent was still open to debate.

Speaking at the Personal Finance Society (PFS) conference Williams said he was ‘uncomfortable’ with the FSA’s definition because it was still open to interpretation.

Williams (pcitured), a non-executive director of the Beaufort Group, said that he expected the firm to continue trading as independent firm but would be considered a ‘restricted whole of market’ label.

Paul Lothian Verus Chartered Financial Planners, said: ‘We’re not too precious about the title, so we’re probably falling in that passive restricted space because we won’t recommend unregulated collective investment schemes or structured products.’

15 comments so far. Why not have your say?

Paul Harding

Nov 09, 2012 at 14:27

My understanding is that the obligation is solely that you dont restrict yourself BEFORE you find out a clients circumstances and objectives - so if you want to BE independent in reality then why would you want to do that anyway?

But that seems to be so STBO that maybe Im missing the point.........?

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Sean Condon

Nov 09, 2012 at 14:32

I find it very concerning that, this close to RDR happening, there is still a lot of misunderstanding about some fairly central stuff.

In the article above, the final paragraph from Paul Lothian expresses an incorrect but widely held view.

Independent status is all about where you START from, not where you end up with your advice.

So as long as you start from a position of looking at the whole of the market place, it doesn't matter to your status as independent that you exclude certain investment product characteristics as being unsuitable for your clients.

So for example, you may well feel that structured products have unacceptable levels of third party risk or implicit charges that opaque or whatever your reason, as long as you have a reason. You can then exclude them as being unsuitable for your clients.

Passive funds are not in and of themselves a type of retail product, they are an investment style or characteristic, which you may either like or not like. But to say that because you end up with a passive recommendation, you must be restricted, is wrong.

Think about it. Is anyone suggesting that if you only use actively managed funds you would be resticted because you HADN'T used passive??

I raised this point at an FSA presentation last month with Rory Percival and he not only agreed but ssaid that the FSA intended to publish some 'myth busting' articles very shortly.

The decision to go restricted or independent is obviously a firms own decision to make, but please make sure you make it fully informed of the facts!

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Nov 09, 2012 at 14:38

While on the subject, can someone answer this question please?

If, before a client meets with an IFA, the IFA has already decided, if possible, to move them to xyz product provider that runs their model portfolio service, would that be 'independent' or a 'restricted' adviser.

They use one product provider possibly at a push two each and every time for pension & investment business.

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Green Eyed Monster

Nov 09, 2012 at 15:00


In my opinion, if the IFA firm chose the product provider before researching the market for the appropriate investment fund, then this would be restrictive practice. Same goes for a platform. If the platform is chosen before the product that is restrictive.

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Paul Harding

Nov 09, 2012 at 15:16


I dont think hes saying that ? I think he means that (logically) an IFAs model portfolios would only be held on one platform, so IF he THEN believes that his model portfolios are the most suitable personal solution, then inevitably only one provider can accommodate that solution because thats where his firms models are housed?

I think....?

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Paul Harding

Nov 09, 2012 at 15:18

......and obviously he cant really know that the model is personally suitable beforehand...but thats STBO I think

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Nov 09, 2012 at 15:22

Paul, that is correct

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Dan Rear

Nov 09, 2012 at 15:38

Aren't we getting tied-up here chaps. As I understand it if you're remaining Independent, you have to consider every 'Retail Investment Product' as defined by our wonderful Regulators.

So aswell as the obvious, Bonds/Collectives/PPs of various hues, you'd need to think about ITs/ETFs/VCTs/EIS/UCIS etc. And while most of the latter may be wholly unsuitable for the majority of most IFA's clients, you'd need to specifically rule them out either on a Suitability Letter, or elsewhere on literature passed to clients.

Of course before the FSA tinkered with, and in my view bastardised, the language, everyone knew what 'Independent' meant. Its a bit rich of them (Rory P as above) now saying they're gonna' publish further guidance - none was needed 'til they mucked things up...

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Keith Cobby

Nov 09, 2012 at 15:45

Did everybody really know what being 'independent' meant? Did it mean being independent of the product provider who paid the commission?

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Green Eyed Monster

Nov 09, 2012 at 15:56

Paul, I'm not sure I agree that it is logical that an IFA firm has its model portfolios on only one product provider's platform. There is nothing to prevent it having its models on several platforms, and then when the partiucular fund research/model is chosen for the client the most appropriate platform is then chosen.

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Sean Condon

Nov 09, 2012 at 15:59

Sorry Dan Rear but you are stating an incorrect view. You do not need to 'specifically rule out' a generic product in a suitability letter, not now and not after 1st Jan 2013.

This point was again discussed at the meeting with Rory Percival (which was a seminar on Centralised Investment Propositions and Replacement Business in October) and the clue is that it is a suitability letter, not an unsuitability letter!

You have never needed to justify the things you don't recommend - only the things you do recommend, unless of course it is specifically relevant to the clients situation and there is a choice of specific routes to take. Then you might weigh up the pro's and con's.

Do you really believe that advisers in January 2013 will start sending clients letters listing all the financial products that are NOT suitable for them?

I wish Citywire would write some articles that specifically deal with providing clarity on these matters. It isn't hard but these misunderstandings and myths still persist.

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Dan Rear

Nov 09, 2012 at 16:18

Sean, I hope you're right, thats the commonsense attitude.

But, I had thought the FSA/FCA DID want IFAs to consider a broader range of Retail Investment Products than we routinely do now. If not, what will be the difference between 'Independent' and 'Restricted Whole of Market'?

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Paul Harding

Nov 09, 2012 at 16:36


Maybe logical was the wrong word. Perhaps "manageable commercially" would have been a better choice!? (right or wrong as that may be!)

@ Dan

Surely all that is being asked is that you START with no preconceptions and with nothing ruled out. I think thats what many IFAs tried to do already, and probably what clients thought IFAs did, and so I presume the FSA simply wanted to address this for any advisers who didnt take that approach and were more restricted in their outlook.

Its pretty non-controversial and simple, but one slight fear I have is evidencing things (that might have been impossible to evidence) to someone in a decades time who might be judging by audit standards that were never intended at outset....

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Phil Castle

Nov 09, 2012 at 16:43

Yes - Independent status is all about where you START from, not where you end up with your advice.

It is about WHO places the restriction, the adviser/firm or the client. A client may place a restriction on the amount of research time(money) they want you to spend, in which case certain types of collective may be deemed more appropriate. They may want only products covered by the UKs FSCS and NOT Irish FSCS etc. If we only want to advise on UK covered FSCS products, then we are placing the restriction and not the client for instance.

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Scott Sinclair, editor - IFAonline

Nov 10, 2012 at 11:49

Confusion persists over this issue because the FSA has a) softened its original stance on independence and, b) been a little hazy (and lazy) in its literature.

For an adviser unsure on whether they are fulfilling the independence requirements, remember the following:

You do not have to consider (far less recommend) every product listed under the FSA's definition of 'retail investment product' (RIP) to be independent. Rather, you just need to be able (and that's the key word) to recommend them.

You are 'able' to recommend them in two ways: the first is by having sufficient knowledge of the products; the second is by not being 'restricted' in your ability to recommend them (by your employer or regulatory permissions).

Think of it in this way: if, before a client even walks in the door, you are not 'able' to recommend each of the RIP products when required, you are a 'restricted' adviser. If, on the other hand, the client requests or, following a fact-find and suitability assessment, it is the right thing for you to do to limit the product list, you satisfy the independence test.

I now fear I, too, have not been particularly clear! But I hope some of you who did not have it before have found some clarity.

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