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In a restricted world is there still value in being independent?
by Danielle Levy on Jan 24, 2013 at 12:27
One of the most profound consequences of the retail distribution review (RDR) has been the FSA’s decision to redefine the independent standard in financial advice.
This has meant many wealth management firms are now grappling with the realities of having to take on the ‘restricted’ label.
Under RDR rules, private client investment companies that do not offer life policies and pensions – which now fall under the FSA’s definition of retail investment products – will not be permitted to describe their services as independent. Similarly, firms that use models and internal multi-asset funds that do not cover all retail investment products might also struggle to meet the new requirements.
Even businesses that have in-house financial planning capabilities and can cover the whole range of retail investment products could still fall short of the rules, as the person in charge of the process of giving advice must cover the whole range of retail investment products, even though they are unbiased and extensive in what they do cover.
Vestra is one business that has faced this dilemma. The firm offers investment management and financial planning services and can cover all of the relevant areas to meet the new independent standard, as its process entails multiple advisers or specialists dealing with the client, rather than one person with overall responsibility for the totality of the advice.
Yet it has reluctantly opted for what founder David Scott describes as a ‘cautious interpretation of the guidance’.
‘We have no choice, as we see it, but to be restricted,’ he says.
Nonetheless, Scott says choosing not to change Vestra’s process to meet the rules is the right decision.
‘We believe one person cannot have the knowledge to do this; indeed, we offer the two services of portfolio management and wealth planning as separate services. The client can then decide whether they want one or both. A combination of wealth planning and portfolio management will ensure that the entire market is covered,’ Scott says.
Vestra is not alone. Wealth management companies across the piste from the national firms through to the boutiques will now be labelled restricted under the new rules. They include Brewin Dolphin, Quilter, Rathbones, Close Brothers Asset Management and well known boutiques such as Cheviot and Berry Asset Management.
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