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
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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