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View the article online at http://citywire.co.uk/wealth-manager/article/a653376

In a restricted world is there still value in being independent?

by Danielle Levy on Jan 24, 2013 at 12:27

Restricted referrals

Nonetheless, businesses operating in the restricted universe have been dealt a positive hand following the Solicitors Regulation Authority’s (SRA) decision to allow referrals to restricted advisers, which followed a similar decision by the Institute of Chartered Accountants in England and Wales (ICAEW).

If a large portion of the wealth management profession is restricted under the new regime, and solicitors and accountants can continue to refer on business to restricted firms, is there any value in being independent any more?

Chris Macdonald (pictured), chief executive of Brooks Macdonald, believes the new independence rules are overly complex and reverse the headway made in the last 10-12 years in explaining to consumers what independent financial advice actually is.

Under the new rules the company is restricted independent, as its asset management division (which provides discretionary investment services) is restricted, while its small in-house advisory business, which accounts for 7% of turnover, covers life products and therefore can meet the independent standard.

Macdonald says an RDR II could well be necessary due to the confusion created by the new independent definition.

‘I am a big fan of the RDR but one of the [intended] outcomes is consumer clarity and in this particular case, I am not sure there will be consumer clarity,’ he says.

‘I have heard people saying they will be restricted independent, or restricted specialist. I don’t think this will be any clearer for consumers.’

His sentiments are echoed by Vestra’s Scott, who says: ‘There is a danger that the interpretation of what is required to be independent will be different to what many clients understand by independence in normal parlance.’

Meanwhile, Close Brothers Asset Management’s chief executive Martin Andrew says his firm will be ‘restricted and proud of it’ in the new RDR world, but suggests the regulator should review the basis of its new definitions.

The company is restricted as it has an internal unitised multi-asset fund range. Andrew views this criteria as arbitrary, given that firms that have model portfolio services but no internal funds will be independent, even if both types of firm take a whole of market approach.

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4 comments so far. Why not have your say?

Alan Steel

Jan 24, 2013 at 16:48

If you were an investor , why would you settle for advice that was restricted ? Or am I missing something ? Mind you I'd rather settle for advice that was obviously in my best interest than from somebody competing with others to sell more of this and that !

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Gillian Cardy

Jan 27, 2013 at 10:40

How interesting : why did the headline writer not see fit to pose the question :

"In an Independent world is there value in being Restricted?"

As one of the consumers researched in one of the earliest documents at the start of RDR said : “Why would you go to [a non-independent adviser] when you can go to somebody who will search the whole market?”

We have moved on from the any colour as long it's black style of customer service proposition ... the 21st century is not a great time to say to people what they can and cannot have - determined by the supplier.

Anyway - discretionary services are not personal recommendations and outside the all of the RDR rules anyway ...

And if you claim to be in the personal financial advice space and decline to advise your clients on pensions or life policies (annuities / investment bonds) then I think most people would agree that this is a Restriction to the advice you give.

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Wizdon

Jan 27, 2013 at 18:52

Re the question posed : 'Why would you go to [a non-independent adviser] when you can go to somebody who will search the whole market?” Well, consumers do, and in droves - e.g. success of SJP- so maybe on balance process, governance, strong backing, size, and just maybe people want to deal with successful profitable firms with 'sales people' that motivate them to take action and make them feel good!

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Gillian Cardy

Jan 29, 2013 at 15:01

Which is precisely the evidence that suggests to the regulator that the status disclosure regime might not be working as well as it should - good process and good governance are not (or shouldn't be) the preserve of big companies - neither is success or profit.

Let's ask consumers if they want to deal with "sales people who make them feel good" ... personally I'd expect the results to be less than encouraging!!

Professional advisers with clients' interests at heart who tell them the truth even if it hurts might be somewhat more attractive as a proposition for a post-RDR world??

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